- 31 октября 2019, 16:07
- The Barrel. Platts oil blog
Coal demand is declining in the US and Europe, but coal remains the world’s most dominant fuel for power generation.
Despite what you may read, the global market for thermal coal continues to gain steam, particularly as Asia builds new coal-fired power plants to charge its growing economies.
This year, India is likely to surpass the US as the world’s second largest coal producer, with production in the South Asian country expected to total more than 700 million mt compared with 685 million mt in the US.
China is the globe’s biggest producer of coal, at roughly 3.7 billion mt, and also the world’s biggest importer, at roughly 220 million mt.
In a few years, however, India is expected to overtake China to become the top importer, as a growing population seeks to electrify their economy with an inexpensive fuel that can provide reliable baseload generation.
It’s an affirmation of the significant structural changes underway in the global coal market: coal demand is declining in the West, but growing in the East. For the US, this means that even as domestic coal demand wanes, new export opportunities are emerging, with shipments from the West coast of North America ramping up.
Coalfield to coast
India is already the biggest market for US thermal coal – coal for power generation as opposed to metallurgical coal, which is used in steelmaking. But most of those imports ship from ports along the US East and Gulf coasts: Baltimore, Hampton Roads and New Orleans.
The majority of thermal coal mined in the US, however, comes from coalfields in the Rocky Mountain states: Wyoming, Montana, Colorado and Utah. In fact, Wyoming is home to the world’s biggest coal mine, the North Antelope Rochelle mine in the heart of the Powder River Basin, the most productive coal field in the US.
In 2018, the NARM mine produced 98.3 million st. Nearly all of that coal, and nearly all of the 300 million st mined last year in Wyoming, was consumed by US utilities, partly due to a lack of capacity at export terminals on the US West Coast.
Demand for Western US coal exists: South Korea and Japan are the third and fourth biggest markets for US thermal coal. Both nations rely heavily on imports from other Asian nations such as Indonesia and Australia, but value US coal for both quality and supply diversification.
Thermal coal from Utah and Colorado has a heat content of roughly 6,000 kcal/kg, which compares favorably to FOB Newcastle thermal coal from Australia. In addition, thermal coal from Montana has a heat content of roughly 5,000 kcal/kg, which compares favorably with Indonesian coal.
But a lack of terminal capacity means volumes have historically been limited. In 2018, US thermal coal exports off the West Coast totaled 9.9 million mt compared with 39 million mt from other ports, primarily New Orleans, Baltimore and Norfolk, Virginia.
Additional terminals have been proposed along the West Coast but none have been built, defeated by either market dynamics or stiff environmental resistance, earning the region the sobriquet “The Green Wall.”
On October 25, S&P Global Platts’ recently-launched assessment FOB Long Beach 6,000 kcal/kg NAR stood at $79.72/mt and FOB Oakland 6,000 kcal/kg NAR at $77.79/mt, both at a premium to FOB Newcastle 6,300 kcal/kg GAR, which was assessed the same day at $63.20/mt. Alongside the two US West Coast terminals, Platts also introduced an FOB Vancouver 5,000 kcal/kg NAR assessment.
Feeding Asia’s coal-fired plants
As US domestic demand declines due to cheap natural gas and increased renewables generation, US coal producers want to pivot to overseas markets, and Asia in particular, which remains a growth story for thermal coal.
China is expected to add another 117 GW of coal-fired capacity in the coming years, and India another 79 GW, according to the Platts World Electric Power Plant database. These new coal plants will complement existing coal capacity in those countries of 973 GW and 234 GW, respectively.
For comparison, the US coal fleet currently stands at roughly 240 GW.
But coal demand is also growing in Southeast Asia. Indonesia is either building or planning to build another 32 GW of coal capacity on top of 30 GW of existing coal generation, while Vietnam is building or planning to build 43 GW of new coal generation on top of 18 GW of existing coal generation, according to the WEPP data.
Taiwan, the Philippines, Malaysia, Bangladesh, Cambodia, Laos and Thailand are all building or planning to build another 40 GW of coal generation between them.
In summary, Asian markets are a natural destination for US thermal coal, and Platts’ new US FOB assessments are set to reflect this trade.
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