'Golden age' for coal in China over, says IEA

'Golden age' for coal in China over, says IEA

In this photo taken on Nov 20, 2015, a worker sorts coal on a conveyer belt near a coal mine at Datong, in China's northern Shanxi province. For decades coal has been the backbone of the northern province of Shanxi, providing work for millions of families. (AFP photo)
In this photo taken on Nov 20, 2015, a worker sorts coal on a conveyer belt near a coal mine at Datong, in China's northern Shanxi province. For decades coal has been the backbone of the northern province of Shanxi, providing work for millions of families. (AFP photo)

The International Energy Agency has cut its five-year coal demand forecast for a third year, saying the "golden age of coal in China" seemed over amid a slowdown in the world’s second-biggest economy.

Coal use is expected to rise by 0.8% a year through 2020 to 5.8 billion tonnes of coal equivalent, less than the 2.1% predicted last year for the following five years, the Paris-based agency said Friday in its Medium-Term Coal Market Report. Half of the increase will come from India and a quarter from Southeast Asia, offsetting declining consumption in the US and Europe, the group said.

The fuel’s role in total electricity generation is poised to fall for the first time in two decades to 37% in 2020 from 41% now, the IEA said. Last week’s global climate deal in Paris will likely spur increased use of renewables, while an abundance of shale gas means the fuel’s decline is inevitable in the US, it said.

“China has definitively entered a new era in which its economic growth is slowing down, the energy-intensity of that growth is declining,” IEA Executive Director Fatih Birol said in the report. “The economic transformation in China and environmental policies worldwide – including the recent climate agreement in Paris – will likely continue to constrain global coal demand.”

Chinese demand last year fell by 2.9% to 3.9 billion tonnes in its first annual drop since 1999, according to the report. Even though India overtook the US as the second largest user last year and will become the largest importer of thermal coal, the nation is unlikely to replace China as its energy-intensive industry is smaller.

Global consumption last year fell for the first time this century. Total demand slid by 0.9% to 7.99 billion tonnes amid a 1% drop in steam-coal consumption. The use of metallurgical coal, needed to produce iron and steel, rose 1.3%, according to IEA.

“In the next four to five years, we expect prices to remain under pressure” and trade below US$50 a tonne, Birol said on Friday in Singapore. “The coal industry is facing huge challenges in terms of profits. We see lots of layoffs across the world, ranging from China to the US.”

Newcastle coal, the main pricing benchmark in Asia, has slumped to about $52 a tonne, heading a fifth year of declines, according to data from Globalcoal.

Coal supply, meanwhile, fell last year for the first time since 1999, driven by declines in China and Indonesia, according to the report. The US, by contrast, increased its coal output, along with India and Australia, the report showed.

Australia is expected to recover the “throne” and become the largest total coal exporter, as competitor Indonesia is hurt by slumping prices and falling Chinese imports, the IEA said. When it comes to only coal used in power stations, Indonesia, however, will easily remain the world’s biggest exporter, according to the report.

Exports of thermal coal from Australia will grow by 4.5% a year on average over the outlook period, helped by growing demand in India, while Australian producers will benefit from the cost cuts they’ve made in recent years, the IEA forecasts.



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