Medium-term Coal Market Report 2012

Keisuke Sadamori. Director, Energy Markets and Security.

Paris, 18 December 2012

© OECD/IEA 2012
Business as usual

Global primary energy supply from fossil fuels

 Coal demand keep growing

 And so, too, coal trade
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China is coal. Coal is China

Fossil fuel demand in major consuming regions

* The increase in US oil demand in 2012 is caused by differing definitions. While historic data for US oil
demand are based on IEA’s Oil Information, projections of US demand refer to US50 oil demand as
defined in Table 2 of IEA’s Medium-Term Oil Market Report 2012.

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Power generation in non-OECD is crucial

Absolute
Total coal-based electricity production growth
in 2009 and 2010 2009/10
TWh
700 35%

600 30%

500 25%

400 20%

300 15%

200 10%

100 5%

0 0%

2009 2010 Relative growth 2009/10

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US shale gas switches on coal in Europe
USD/GJ Mt
6 3,5

5 3

2,5
4
2
3
1,5
2
1

1 0,5

0 0

US steam coal exports to Europe (right axis) Northwest Europe (ARA CIF)
Henry Hub price Coal price in Central Appalachia

 Higher transportation costs for gas

hinders regional integration

 In Europe, coal reacts stronger than

gas to US low prices

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A golden age of coal in Europe?

 Low carbon prices: the Eurozone crisis is a surprise, but the renewable ramp
up is not

 Gas to coal switch is already limited by system operation constrains

 The need for conventional generation is declining

 Decomissioning of old plants is sure, but economics of new coal to build is

questionable
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Moving East

Seaborne
59 Mt exports from
Russia
34 Mt
(93 Mt)
109 Mt 19 Mt

Seaborne Seaborne Seaborne Seaborne

imports to exports from exports from imports to
the Atlantic the Atlantic the Pacific the Pacific
Basin Basin Basin Basin
(218 Mt) (128 Mt) (498 Mt) (573 Mt)

20 Mt 478 Mt

Seaborne
29 Mt exports from 42 Mt
South Africa
(71 Mt)

Atlantic Basin Suppliers to both markets Pacific Basin

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Coal prices are back in sync

USD/t
350

300

250

200

150

100

50

Newcastle steam coal (FOB) Ultra-low volatile PCI coal (FOB)

Australian prime hard coking coal (FOB)

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Indonesia-China, a good partnership

Seaborne steam coal trade

Steam coal imports to China

2009 2010
 Indonesia meets much of
(104 Mt) (133 Mt)
Chinese demand

 For Chinese utilities, Indonesian

coal is a good option

 For low cost Indonesian

Australia Canada United States Other OECD Colombia producers, Chinese coal thirst was
Indonesia South Af rica Russia Vietnam Other good business

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From Beijing to India?

Selected investments of Indian companies in coal assets

Capital
Number of Acquired resources/reserves
Country expenditure
investments (Mt)
(USD Million)
Australia 9 17 138 7 612
Indonesia 28 6 271 4 526
South Africa 4 377 3 300
United States 3 348 820
Total 44 24 134 16 258

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Chinese slow-down can affect seaborne
coal trade

Thermal coal Metallurgical coal

Exporters Importers Exporters Importers

Mtce
100

80

Higher in the BCS

60

40

20

Lower in the BCS

-20

-40
2017

Australia Russia United States Other exporters China Other importers

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Two steps forward

Outlook for global export capacity utilisation for seaborne hard coal until 2017
Mtpa
2 000
1 800
1 600
1 400
1 200
1 000
800
600
400
200
0
2010 2011 2013 2015 2017
Existing export capacity Probable expansions Potential expansions
Port capacity Exports historic Exports - BCS
Exports - CSDC

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Is slow-down already happening?

BREAKING NEWS

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KEY MESSAGES

 Coal demand rises over the outlook period, approaching oil

 Driven mainly by power generation in non OECD countries

 Shale gas revolution led to decline in coal consumption in the US, and to
increased use of coal in Europe

 The large gas-to-coal switch in Europe is projected to peak in 2013

 Whereas China will surpass the rest of the world in coal consumption,
India will gain importance in coal market, becoming the largest seaborne
coal importer

 Seaborne coal trade will continue to increase unless there is a slowdown

in Chinese economy

Announcements of cuts and layoffs, despite many projects in the pipeline

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Thank you for your attention

© OECD/IEA 2012