Carlos Fernández Alvarez Senior Coal Analyst Madrid, 30 January 2014
About the IEA Established in November 1974 in order to: Promote energy security Provide analysis to ensure reliable, affordable and clean energy Current objectives have evolved; Secure member countries reliable energy supply Promote sustainable policies Improve transparency of energy markets Support global co-operation on energy technology Find solutions through engagement and dialogue The Medium-Term Coal Market Report is published under the authority of the IEA Executive Director
Coal only knows a direction: upwards PRIMARY ENERGY FROM FOSSIL FUELS
BAU: China leading the (coal) world COAL DEMAND IN CHINA AND IN THE REST OF THE WORLD
2012: breaking trends COAL DEMAND AND GROWTH IN CHINA AND US
What happened in China in 2012? COAL DEMAND GROWTH IN CHINA (y-o-y)
OECD countries are not reducing coal use COAL DEMAND PROJECTIONS
Growth led by non-oecd COAL DEMAND PROJECTIONS
But who is more coal dependant? COAL USE IN POWER GENERATION Note: 2011 Data
Displace coal in Asia will not be that easy COAL AND GAS PRICES. IMPLIED CO2 PRICE TO TRIGGER FUEL SWITCHING
Seaborne steam coal trade, always up DEVELOPMENT OF SEABORNE HARD COAL MARKET, 2000-12 Mt 1 200 1 000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* Steam coal Metallurgical coal Annual growth (right axis) 14% 12% 10% 8% 6% 4% 2% 0%
and moving East Total global trade volume 887 Mt (2012) (+113 Mt 2011/12) Seaborne exports from 51 Mt (-4) Russia 97 Mt (+7) 113 Mt (+15) 22 Mt (+3) 46 Mt (+11) Seaborne imports to the Atlantic Basin 206 Mt (+2) Seaborne exports from the Atlantic Basin 135 Mt (+18) Seaborne exports from the Pacific Basin 582 Mt (+82) Seaborne imports to the Pacific Basin 681 Mt (+111) 24 Mt (-5) 18 Mt (-3) Seaborne exports from South Africa 74 Mt (+6) 563 Mt (+85) 49 Mt (+12) Atlantic Basin Suppliers to both markets Pacific Basin
Paper trade still is in the Atlantic COAL DERIVATIVES TRADE Mt 3 000 2 500 2 000 1 500 1 000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 API2 API4 Other
Russian coal: so far away AVERAGE DISTANCE FROM SOME EXPORTING REGIONS TO THE PORTS DISTANCE FOR COAL IN RUSSIA Mt 160 140 120 100 80 60 40 20 Mainly domestically consumed coal Exported coal 0 < 499 500-1 999 2 000-3 999 4 000-5 999 > 6 000 km 2006 2009 2012
Prices going down SPOT PRICE OF THERMAL, COKING AND PCI COAL (AUSTRALIA-FOB) USD/t 350 300 250 200 150 100 50 0 Newcastle steam coal (FOB) Australian low vol PCI (FOB) Australian prime hard coking (FOB)
South African coal: going to Asia DESTINATION OF SOUTH AFRICAN COAL EXPORTS Mt 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Japan and Korea China India Other Asia Europe ROW
Colombian coal taking its place COLOMBIAN AND SOUTH AFRICAN EXPORTS TO EUROPE AND PRICES USD/t Mt 140 200 105 150 70 100 35 50 0 0 South African exports to Europe (right axis) Colombian exports to Europe (right axis) Richards Bay (FOB + freight) Puerto Bolivar (FOB + freight) Northwest Europe (ARA CIF)
Uneconomic decisions? AUSTRALIAN STEAM COAL SUPPLY COST CURVE AND PRICES USD/t 180 160 140 120 100 80 60 40 20 0 Exports 2012 covering FOB costs Exports 2012 0 20 40 60 80 100 120 140 160 Mt Newcastle FOB (2012 average) FOB costs Short-term marginal costs
Does coal price follow oil and gas prices? 1 252 DAY ROLLING CORRELATIONS FOR COAL WITH GAS AND OIL 0.5 0-0.5-1 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 API2-TTF 252 day rolling correlation API2-Brent 252 day rolling correlation
Met coal producers also struggling MET COAL COST CURVE AND PRICES USD/t 300 250 200 150 FOB price Jan 12 FOB price Nov 12 100 50 0 0 50 100 150 200 250 Australia Canada Russia United States Other Mt
Debunking myths: US shale gas and coal price GW 12 10 8 6 4 2 0 US coal fired retirements 2009 2010 2011 2012 US retirements
Was unburned US coal exported? 2011-12 COAL BALANCE IN US
This is the answer The James River Coal company announced Tuesday it is closing several mines in eastern Kentucky and laying off 525 employees. Argus Energy has notified West Virginia labor authorities that it will shut two underground coal mines, a preparation plant and the Wayne County River Terminal on December 27. Major Layoffs at Oxbow Coal Mine America West Resources entered bankruptcy in February 2013 The vice president of Springfield Coal Company tells us nearly 190 Crown III miners have been laid off in Farmersville. Patriot Coal entered bankruptcy protection in July 2012 More than 250 miners and employees have been let go. The lay-offs took place at the Guyan Surface Mine and the Fanco Prep Plant in Yolyn in Logan County.
China, always uncertain MAIN FACTORS IMPACTING ON COAL DEMAND IN CHINA
Economics of coal-based SNG does make sense A VERY ROUGH ESTIMATE OF COAL-BASED SNG
Coal trade: growing faster, moving East 113 (+16) 65 (+14) 113 (+21) 489 (+106) 89 (+15) 223 (+63) Global thermal seaborne trade 1131 Mt (2018) (+244 Mt 2012-18)
Wrapping up Coal demand will grow at 2.3% per year to reach almost 9 billion tonnes in 2018 Despite some policy changes, China will lead the way, absorbing roughly 60 % of that growth OECD consumption remains flat Indonesia and Australia will lead exports growth Coal conversion in China emerges as a driver of demand growth
Thanks for your attention Muchas gracias To buy the book, click: http://www.iea.org/w/bookshop/add.aspx?id=461 Comments to the report are welcome and should be addressed to: Carlos.Fernandez@iea.org