Coal Supply- Demand and

Price Trend
Atsuo Sagawa, Chief Researcher
The Institute of Energy Economics, J apan
Coal Group, Strategy and Industry Research Unit
February 4 (Monday), 2008
I EEJ : May 2008
2
Global Consumption of Coal
Note: Figures for 2006 are estimated.
Source: IEA, "Coal Information 2007"
Coal demand has increased since 2002, particularly in Asia. Global coal consumption in 2006 was
6.26 billion tons (5.34 billion tons excluding brown coal).
Up to 2030, coal consumption is expected to grow at the annual rate of 2.1%, driven by the growth
of demand especially in Asia and the increasing demand for coal in the power generation sector.
The largest growth in coal consumption is expected in China and India, followed by South Korea,
Taiwan and other Southeast Asian countries.
Source: EIA, "International Energy Outlook 2007"
Trend of coal consumption by area
Outlook for coal consumption by area
(in reference case)
1,037 1,033
1,049
1,059
1,084
1,107
1,092
1,298 1,292
1,279
1,322
1,314
1,299
1,341
2,080
(44.9%)
2,097
(45.2%)
2,252
(47.0%)
2,549
(49.4%)
2,940
(52.7%)
3,189
(54.7%)
3,596
(57.4%)
5,155
6,261
4,630
4,638
4,790
5,577
5,834
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
'00 '01 '02 '03 '04 '05 '06*
(million tons)
Central/South America
and Middle East
Africa
Europe and
Former USSR
North America
Asia and Oceania
1,073
1,181
1,263
1,355
1,551
1,728
1,330
1,377
1,400
1,409
1,393
1,384
2,894
(52.3%)
3,688
(56.3%)
4,275
(58.8%)
4,882
(61.0%)
5,429
(62.0%)
6,001
(63.1%)
7,271
5,533
6,550
7,999
8,752
9,511
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
'04 '10 '15 '20 '25 '30
(million tons)
I EEJ : May 2008
3
Global Trading of Coal
Note: Figures for 2006 are estimated.
Source: IEA "Coal Information 2007"
Trade volume has been increasing as demand has grown.
Trade volume is expected to grow further, particularly in Asia.
Trend of export volume and export ratio
Outlook for coal trade
(in reference case)
Source: EIA "International Energy Outlook 2007"
289
382
476
175
187
173
129
167
198
58
50
57
56
67
116
880
523
636
765
206
244
290
730
1,055
0
200
400
600
800
1,000
2005 2015 2030
(m illion tons)
Am erica
Europe
Asia
S
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Import area:
1
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7
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1
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64
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1
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100
200
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400
500
600
700
800
900
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06*
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r
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(
%
)
Exports (metallurgical coal) Exports (steaming coal)
Export/production ratio (all coal) Export/production ratio (metallurgical coal)
Export/production ratio (steaming coal)
I EEJ : May 2008
4
Major Coal Exporters and Importers of the World
Note: Figures for 2006 are estimated. Source: IEA "Coal Information 2007"
0
50
100
150
200
250
'
8
0
'
8
2
'
8
4
'
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6
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*
(million tons)
Australia
Indonesia
Russia
South Africa
China
Colombia
United
States
Canada
Kazakhstan
Vietnam
Poland
Trend of export volume by country
Trend of import volume by country
0
50
100
150
200
250
'
8
0
'
8
2
'
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4
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6
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6
*
(million tons)
Japan
South Korea
Taiwan
Britain
Germany
India
China
United
States
Russia
I EEJ : May 2008
5
Trend of Steaming Coal Prices
(Australian and South African Coal Prices)
Prices have been rising since June 2003 and reached historical highs in July 2004.
Subsequently, prices fell as supply capacity was expanded to meet the demand particularly
in Australia and Indonesia, and fluctuated in the 40-50 dollar/ton range.
However, prices began to rise again sharply from June 2007.
Notes: Barlow Jonker Index : a spot price for steaming coal, FOB Newcastle, Australia.
RB Weekly Index : a spot price for steaming coal, FOB Richards Bay, South Africa.
Source: Barlow Jonker, "Coal Fax"; Global Coal data; etc.
10
20
30
40
50
60
70
80
90
100
110
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8
US$/t
Barlow Jonker Index RB W eekly Index Annual contract price of Australian steam ing coal for Japan
I EEJ : May 2008
6
Trend of Metallurgical Coal (hard Coking Coal) Prices
Metallurgical coal prices rose sharply in 2005 (2004 in the case of Chinese coal).
Prices fell in the two subsequent years as the supply capacity was expanded in
response to high prices.
However, fears of a supply shortage grew in the market in 2007, and it was reported
that the spot price for export to India exceeded the price in 2005.
Source: Barlow Jonker "Australian Coal Report" and "China Coal Report" ; etc.
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
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(US$/t)
From Queensland, Australia, to Japan From Australia to Europe From China Annual contract for sales to Japan
I EEJ : May 2008
7
Major Drivers of Coal Price Rising (Demand Side)
Growth in supply capacity unable to match growth in demand
Growth of demand and imports by Asia
Growth of demand in existing importers (such as South Korea, Taiwan and Japan)
Growth of imports by new importers (such as India and China)
Note: Figures for 2006 are estimated.
Source: IEA "Coal Information 2007"
Global imports of coal
(year-on-year increment)
Global consumption of coal
(year-on-year increment)
-50
0
50
100
150
200
250
300
350
400
450
500
2001 2002 2003 2004 2005 2006
Others
Asia
Global
(million tons)
-20
-10
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006
Others
Asia
Global
(million tons)
I EEJ : May 2008
8
Major Drivers of Coal Price Rising (Demand Side)
South Korea:
Imports in 2007 amounted to 88.3 million tons (up 8.6 million tons from the previous
year): steaming coal 65.6 million tons (up 6.6 million tons) and metallurgical coal 17.3
million tons (up 1.7 million tons).
Taiwan:
Imports in 2007 amounted to 65.2 million tons (up 3.0 million tons from the previous
year): steaming coal 60.3 million tons (up 3.1 million tons) and metallurgical coal 4.8
million tons (down 0.05 million tons).
Source:Korea Trade Statistics
Coal imports by South Korea
(year-on-year increment)
Coal imports by Taiwan
(year-on-year increment)
Source:Bureau of Energy, Ministry of Economic Affairs
-1
0
1
2
3
4
5
6
7
2001 2002 2003 2004 2005 2006 2007
(million tons)
Anthracite
Steaming coal
Metallurgical coal
Total
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
2001 2002 2003 2004 2005 2006 2007
(million tons)
Anthracite
Steaming coal
Metallurgical coal
Total
I EEJ : May 2008
9
Major Drivers of Coal Price Rising (Demand Side)
China:
Imports in 2007 amounted to 51.0 million tons (up 12.8 million tons from the previous year):
steaming coal 13.3 million tons (up 2.8 million tons), metallurgical coal 6.2 million tons (up 1.6 million
tons) and anthracite 28.4 million tons (up 5.8 million tons).
India:
Imports in 2006 amounted to 40.5 million tons (up 1.9 million tons from the previous year): steaming coal
21.9 million tons (up 0.2 million tons) and metallurgical coal 18.6 million tons (up 1.7 million tons).
Imports in 2007 from January to June amounted to 24.8 million tons (up 4.6 million tons).
India increased its imports from Indonesia (steaming coal), Australia (metallurgical coal) and South
Africa (steaming coal).
Coal imports by China
(year-on-year increment)
Coal imports by India
(year-on-year increment)
Source: TEX report, etc.
Note: The import volume in 2007 is compared with 2006 by the
sum of from January to June.
Source: IEA, "Coal Information 2007" and TEX report
-3
0
3
6
9
12
15
2001 2002 2003 2004 2005 2006 2007
(million tons)
Anthracite
Steaming coal
Metallurgical coal
Total
-2
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007
(million tons)
Steaming coal
Metallurgical coal
Total
I EEJ : May 2008
10
Major Drivers of Coal Price Rising (Demand Side)
Japan:
Imports in 2007 amounted to 186.5 million tons (up 9.3 million tons from the previous
year): steaming coal 95.2 million tons (up 8.5 million tons), metallurgical coal 85.8
million tons (up 1.2 million tons) and anthracite 5.5 million tons (down 0.4 million tons).
Source: Japan Trade Statistics
Coal imports by Japan (year-on-year increment)
-6
-4
-2
0
2
4
6
8
10
12
14
2001 2002 2003 2004 2005 2006 2007
(million tons)
Anthracite
Steaming coal
Metallurgical coal
Total
I EEJ : May 2008
11
Major Drivers of Coal Price Rising (Supply Side)
Growth in supply capacity unable to match growth in demand
Bottleneck of transportation infrastructure in Australia (export infrastructure capacity unable to meet
growth in export demand):
Extraordinarily ship congestion at Australian ports due to the above issue
Controlling the export volume to solve the ship congestion
Australia unable to increase supply in the face of rising export demand + rising FRT prices:
Concentration of coal export demand in Indonesia
Indonesia reducing export volume for spot sales (inability to respond flexibly to demand)
Ship congestion at Australian ports
0
10
20
30
40
50
60
70
80
'
0
6
/
4
/
2
1
'
0
6
/
5
/
1
9
'
0
6
/
6
/
1
6
'
0
6
/
7
/
1
4
'
0
6
/
8
/
1
1
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0
6
/
9
/
8
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0
6
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1
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6
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1
1
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2
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3
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3
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1
2
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1
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4
Number of ships
Newcastle
Dalrymple Bay
I EEJ : May 2008
12
Major Drivers of Coal Price Rising (Supply Side)
Growth in supply capacity unable to match growth in demand
China reducing exports & increasing imports due to:
- Growth in domestic demand
- Domestic market price > International market price
Net export volume decreasing since 2004
- China depends totally on imports for metallurgical coal and anthracite.
Source: Balow Jonker, China Coal Report & Coal Fax ; etc.
Trend of net coal exports by China
Trend of Chinese steaming coal price
20
30
40
50
60
70
80
90
100
03 04 05 06 07 08
US$/
Chinese steaming coal price for domestic market
(Datong coal reference price, FOB Qinhuangdao)
Australian steaming coal spot price
Chinese steaming coal for export to Japan
(annual contract price for L/T trade))
-30
0
30
60
90
2000 2001 2002 2003 2004 2005 2006 2007
(million tons)
Anthracite
Steaming coal
Metallurgical coal
Total
Source: TEX report, etc.
I EEJ : May 2008
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
(US$/t)
2004
2007
2006
2005
2008
13
Major Drivers of Coal Price Rising (Supply Side)
Drop in production due to natural disaster
- Rainstorm in New South Wales, Australia (early June)
- Delayed lifting of rainy season in Indonesia
- Heavy rain in South Kalimantan (late July)
Drop in production due to accidents and troubles
Trend of Australian steaming coal spot price (Barlow Jonker Index)
Rainstorm in NSW, longer rainy
season in Indonesia, etc.
Australia controlling exports to solve the
ship congestion at ports, heavy rain in
South Kalimantan, etc.
Early securing of coal supply
for winter demand season in
the tight coal market
Source: Barlow Jonker, "Coal Fax"
I EEJ : May 2008
14
Recent Coal Market Situation
Successive occurrence of events that may lead to higher prices:
Tighter coal supply-demand in China in winter (demand season)
Higher electricity demand in winter Coal shortage in domestic market
Additional impacts from heavy snow in mid-south China
Suspension of coal exports during the Chinese new year celebration and during the
session of the National Peoples Congress and the Chinese Peoples Political
Consultative Conference
Heavy rain in Queensland State, Australia (mid January 2008)
Some coal mines declared force majeure.
Trend of Chinese steaming coal price Trend of Australian steaming coal
spot price
Source: Balow Jonker, China Coal Report & Coal Fax, etc.
20
30
40
50
60
70
80
90
100
03 04 05 06 07 08
US$/
Chinese steaming coal price for domestic market
(Datong coal reference price, FOB Qinhuangdao)
Australian steaming coal spot price
Chinese steaming coal for export to Japan (annual
contract price for L/T trade)
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
(US$/t)
2004
2007
2006
2005
2008
I EEJ : May 2008
15
Coal Trade in 2008 (Comparison with 2007)
steaming coal Metallurgical coal
Source: abare, Australian Commodities, December quarter
-5.6
8.3
-0.5
4.6
7.5
0.3
1.7
0.6
3.4
0.9
1.8
1.1
-0.1
-12.3
3.5
8.2
-15
-10
-5
0
5
10
15
20
2007 estimated 2008 forecast
(million tons)
Other
countri es
EU
Brazi l
Japan
Tai wan and
South Korea
Indi a
Chi na
Trade
vol ume
11.4
6.0
3.0
4.0
3.5
2.0
4.4
5.0
1.7
1.5
4.9
5.2
-3.6
5.9
-0.8
2.7
24.5
32.3
-5
0
5
10
15
20
25
30
35
2007 estimated 2008 forecast
(million tons)
Other
regi ons
Europe
Other Asi an
countri es
Japan
South Korea
Tai wan
Indi a
Chi na
Trade
vol ume
I EEJ : May 2008
16
Outlook for the Asian Market for 2008 and Subsequent Years
Tight supply-demand for coal will continue. Pay attention to:
Growth in demand
In South Korea, coal-fired power plants commissioned in 2007 will begin full-scale
operation. Moreover, seven new coal-fired power plants will start operation between
the end of 2007 and 2009.
Steaming coal consumption will continue to grow in 2008 and subsequent years.
India and Southeast Asian countries will increase their demand and imports of coal.
Taiwan closed three old coal-fired power plants in 2007 and then coal consumption
by Taiwan Power Company will decrease in 2008 (outputs from coal-fired power
closed will be covered by new LNG-fired power plant).
From 2012, however, new coal-fired power plants are scheduled to start up.
Chinas domestic demand and import/export
Domestic demand will continue to grow, driven mainly by power generation demand.
Tight supply-demand will continue at least several years.
Import/export volume will depend on supply-demand situation and the coal price
trend in the China domestic market and international market, but:
Imports basically will probably continue to increase to meet the demand in the
coastal area.
Exports will probably decrease or remain level.
I EEJ : May 2008
17
Outlook for the Asian Market for 2008 and Subsequent Years
Tight supply-demand for coal will continue. Pay attention to:
Export potential of Australia
Even though export infrastructure is being expanded, growth in capacity
will not catch up with growth in demand at least in 2008.
If expansion projects go well, export capacity is expected to match the
demand in around 2010.
Suppliers are capable of increasing production to meet growth in demand.
Export potential of Indonesia
Domestic demand is growing, driven mainly by the demand for coal in the
power generation sector.
Annual export volume will hit a peak after 2010.
I EEJ : May 2008
Contact: report@tky.ieej.or.jp