Days numbered for coal? That would be an exaggeration in perfect bad faith. However, the global coal demand landscape has changed dramatically since less than a year ago, the International Energy Agency, Iea, sounded the alarm of the imminent overtaking of coal over oil, the dominant source in the world energy mix. Alignment was expected by 2017 while the following 5 years were dedicated to consolidating the leadership. Instead, the last few months have outlined a redefinition of the dynamics of coal demand. Consumption in Europe is stable, the economic locomotives of the BRICS and Next 11 are slowing down the race but it is above all China that is throwing everything off balance. Only its internal consumption is equivalent to that of the rest of the world and its energy hunger has pushed the demand for coal to such an extent that it has increased by 50% within a decade. The measures to combat climate change, imposed by Beijing last July, to cut the use of coal in electricity generation by 40-50% by 2020 as well as the anti-pollution package last month including the ban on building new coal-fired power plants in the capital area, Shanghai and Guangzhou deal a blow to China's coal import volumes. And it reflects on global fossil fuel trade flows. “The world has become dependent on China's insatiable demand,” says Paolo Coghe, energy analyst at Societé Générale. And he does not rule out that by 2015 China may cease to be a net importer of coal with heavy repercussions on price stability. If we then add that the US government has announced its intention to close financing to foreign coal-fired projects, in line with the orientation of the World Bank and that of the European Investment Bank, there are all signs of decline . “Peak coal could happen now; we will have confirmation of this next year but the effects will be seen in 3-5 years” concludes Coghe. Especially after the coal production of Australia and Indonesia is no longer completely swallowed by China, and the tension on demand eases. The downtrend can be seen in spot prices that have slipped from $120 a ton in 2012 to below $80 this summer. A price level that is not competitive enough to cover the cost of infrastructure for large export flows. Especially as terminal construction projects on the Oregon, Washington State and Gulf of Mexico coasts remained on hold.
At the beginning of 2012 the US coal industry expected to export 168 million tons. But his hopes were dashed. This year a 5% drop in exports is expected compared to 113 million tons in 2012. From the domestic market, it leaves little hope after the last green swerve by Obama which further reduces emissions from coal-fired power plants by 40% (1.100 pounds of CO2 per MWh). The limits indicated by the Environmental Protection Agency EPA, even if slightly less demanding than those initially proposed in 2012, are in any case prohibitive constraints for existing plants (they go beyond even the ultra-super-critical new generation ones) and require the use of very advanced technologies costs that push this energy source out of the market.
The current year will be a watershed for global coal markets, reads a report by Goldman Sachs which concludes "The positive phase for investment in coal is coming to an end".
