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China coal capping, lower growth hitting coal prices – analyst

Burgess COMMENTARY

Peter Burgess

China coal capping, lower growth hitting coal prices – analyst

CAPE TOWN (miningweekly.com) – Government energy capping combined with lower economic growth appeared to be limiting coal demand in China and bringing down coal prices, King Abdullah petroleum studies research fellow Rodrigo Echeverri said on Thursday.

January’s coal-price low of $53/t cost insurance freight Antwerp Rotterdam Amsterdam (CIF ARA) was 60% below the mid-2011 peak, and some are speculating that the coal price has still to bottom and could fall further, even as low as $40/t CIF ARA.

Speaking at the IHS Energy South African Coal Exports Conference 2015 attended by Mining Weekly Online, Echeverri said China’s 2015 coal consumption was likely to remain subdued.

He reported that coal’s share in electricity generation in China had dropped from 80% to 75%, with hydroelectric power filling most of the power-supply gap.

The Colombian, who resides in Riyadh, told the conference that China was targeting a primary energy consumption of below four-billion tonnes of coal equivalent from 2011 to 2015, in line with its 12th five-year plan.

He reported that China’s 2014 coal demand had declined for the first time since 1998, when the country’s own coal production fell by 80-million tonnes.

China’s electricity generation from coal and gas was flat in 2014, while hydroelectric generation grew by 24%.

“Coal demand growth seems to have stagnated in the last few years,” Echeverri added.

A transition to more efficient ultrasupercritical coal-fired power plants was under way, resulting in a 22% improvement in power plant efficiency.

However, more than half of the China’s power station fleet still made use of older technology.

While Chinese demand was subdued, Echeverri said India was likely to take much more coal at current prices in the immediate term while rising South East Asian and Vietnamese demand could be expected in the mid-term and long-term.

If you go a year or two ahead, Thailand, Vietnam and others would create additional demand.

“In the very short term I am not that optimistic, but in the medium term there is a good future for coal,” Echeverri commented.

EDITED BY: CREAMER MEDIA REPORTER