IEEJ:January 2019 IEEJ2019 Coal 2018 Analysis and Forecasts to 2023 Keisuke Sadamori Director, Energy Markets and Security, IEA IEEJ, Tokyo, 26 th Dec

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1 Coal 2018 Analysis and Forecasts to 2023 Keisuke Sadamori Director, Energy Markets and Security, IEA IEEJ, Tokyo, 26 th December 2018 IEA

2 Coal market update After two years of decline, global coal demand grew in 2017 and is estimated to increase further again in 2018 Coal demand grew strongly in India, Southeast Asian countries and Korea in 2017, while decline continued in Europe and North America With seaborne thermal coal trade growing and no large new mining capacity, prices remain high High prices pushed up coal production in price sensitive exporters, particularly the US (up 6.3%) and Indonesia (up 5.2%) Climate and air quality regulations, divestment campaigns, phase out policies, declining costs of renewables and more abundant gas are all putting additional pressure on coal 2

3 2017, when growths were bigger than declines again difference in coal consumption (left) and production (right) Mt Mt Whereas growth is mostly in Asia and decline in Europe, United States is in a very particular position 3

4 Prices remain high USD/t Thermal and coking coal price indices, Newcastle (6000 kcal) Australian LV PCI Australian prime hard coking Sustained demand, Chinese supply side reforms and lack of investment in coal mining underpinned high prices 4

5 China is still the price setter in international markets 800 RMB/t Coal prices (6000 kcal/kg) in China Qinhuangdao FOB price Bohai-Rim steam-coal price index The comfort zone for the Chinese producers and consumers is the global reference for international coal prices 5

6 Much talk but not much change Comparison between Coal 2017 and Coal 2018 global coal demand forecasts Mtce Coal 2017 report Coal 2018 report IEA statistics (continuous line) and IEA forecast (dotted line) Despite numerous policy changes and announcements, the forecast of coal demand is almost unchanged compared with last year s forecast 6

7 One planet, two coal worlds Coal demand in select countries/regions in 2000, 2017 and 2023 (forecast) Mtce US EU 28 Japan Korea China India Southeast Asia India and southeast Asia will lead coal demand growth while it will continue to decline in Europe and United States 7

8 Understanding China to understand coal Power Heavy industry Small industrial and residential Coal conversion Four largest coal consuming sectors in China follow different trends 8

9 Fight for blue skies LNG spot prices Coal (Mt) saved in industrial boilers, Beijing-Tianjin-Hebei Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Other regions 7 China UK France Spain TTF Pearl river delta (Guangdong) Yangtze river delta and other Eastern China Source: IEA Coal 2017 Phase out of coal boilers and stoves in China pushed up LNG prices all over the world. In an interconnected world, Chinese coal is at the centre of the energy stage. 9

10 China s path to a less energy intensive economy 16.0% 20.0% 14.0% 15.0% 12.0% 10.0% 10.0% 8.0% 6.0% 5.0% GDP, power demand and coal generation growth in China 4.0% 0.0% 2.0% 5.0% 0.0% GDP growth Total generation growth Coal generation growth GDP growth (6 year average) Power growth (6 years average) Coal generation growth (6 years average) Whereas the structural transformation of the Chinese economy is unequivocal, and blue skies remains the policy priority, electricity demand is boosted by air quality policies, growing middle class and other factors 10

11 Dominance of Chinese power sector in global coal market Relationship between global coal demand and hydro generation/power demand in China Global coal demand increase 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Hydro output or power demand growth China hydro output growth China power demand growth Changes in Chinese power demand and hydro output have a significant impact on global coal demand. 11

12 Coal power generation in India is set to continue to grow TWh Forecast % % % % % % % % % 0 0% Coal-fired generation (TWh) Share coal (%) Share renewables (%) Coal has been a cornerstone of India s power system. Renewables and more efficient coal plants reduce the forecast rate of growth. 12

13 Coal for power will be the driver of demand growth in southeast Asia Electricity generation by source in southeast Asia TWh Forecast Renewables Coal Others Increasing use of coal for electricity will push up consumption in some of the countries in southeast Asia (Indonesia, Vietnam, Philippines and Malaysia) 13

14 (Western) EU on its way out of coal Coal phase out in EU-28 Coal s share in Power Generation 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% No coal power Phase out under discussion Phase out announced No phase out Cyprus, Belgium, Estonia, Latvia, Lithuania, Luxembourg and Malta do not have coal power plants in operation Phase-out policies are broadly announced and implemented in EU countries. The challenge imposed by the end of coal-based electricity is country-specific 14

15 Low investment due to uncertain demand The evolution of exports from six major thermal coal exporters between 2011 and 2023 *Forecast Mt Forecast * 2019* 2020* 2021* 2022* 2023* Indonesia Australia Russia Colombia South Africa United States Russia s infrastructure expansion will support export growth. United States and Indonesia will continue to be the most price sensitive exporters 15

16 International CCUS Summit, Edinburgh UK and IEA hosted 50 senior delegates from across government, industry and the finance sector to support new momentum for CCUS 16

17 Key messages Global coal demand through 2023 set to be stable, as growth in India and other Asian countries will offset decline in Europe and US China remains the key player in coal market. The rise of power demand in China, the main driver of a recent global coal rebound, will likely slow down in the coming years; but uncertainties remain Despite high prices, investment in new mines remains low. Uncertain demand for imported coal, risks associated with climate policy and local opposition have cooled investors appetites One planet, two coal worlds. In one world, closing coal power plants is a key climate policy. In the other, coal will play a continuing role thanks to its affordability and local availability. Carbon capture, utilization and storage is the bridge between the two worlds 17

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