12 minute read
Global
Worldwide demand for coal could hit all-time high in 2022
Advertisement
Coal power is on track to hit a new global record this year after an economic rebound that could drive worldwide coal demand to an all-time high in 2022, according to the International Energy Agency (IEA).
The amount of electricity generated from coal power plants has soared by nine per cent this year after a surge in fossil fuel demand to fuel the recovery from COVID-19 lockdowns, a report by the watchdog says.
Coal power fell by four per cent in 2020 as the pandemic caused a global economic slowdown, but the IEA found that demand for electricity this year had outpaced the growth in low-carbon sources, leading many wealthy economies to rely more heavily on fossil fuel power plants.
The global gas supply crunch, which has caused record-high prices worldwide, has also helped reignite demand for coal, the IEA report says.
The agency found that global demand for coal, including cement and steelmaking, rose by six per cent overall this year. Although the total falls short of record levels of demand for the fuel in 2013 and 2014, the IEA warned that without a policy intervention that high could be surpassed next year.
Fatih Birol, the IEA executive director, said: “Coal is the single largest source of global carbon emissions, and this year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net-zero.
China has been ramping up the production and transportation of coal, along with oil and gas as well as renewables, to cope with the winter peak season for electricity. China State Railway Group Co transported 118 million tons of thermal coal from November 1 to 26, up 34.6 percent year-on-year.
Multiple coal-producing countries are pushing for sales to China, the world’s largest coal buyer that has just overcome a power shortage a couple of months ago. Coal exporters in Russia, Indonesia and Mongolia are all taking steps to enhance cooperation with China now.
On Monday, 12 Chinese coal import enterprises signed the initial batch of medium- and longterm thermal coal supply contracts for 2022 with 12 coal export enterprises from Russia, Indonesia and Mongolia during the 2021 China Import-coal Summit held in Beijing.
The first batch of contracts is valued at $2.49 billion. Coal exporters in the three countries will supply 25.82 million tons of thermal coal to China.
Han Jianjun, an industry insider in Ordos City of North China’s Inner Mongolia Autonomous Region, told the Global Times that China’s overall coal import volume in 2020 was 300 million tons, and these contracts represent nearly 10 percent of the nation’s annual coal imports.
According to statistics from the General Administration of Customs released on December 7, China imported 292.3 million tons of coal in the first 11 months of 2021, a year-on-year increase of 10.64 percent.
Coal Use Is Reaching Record Levels In India And China
The International Energy Agency has called on China and India to reduce coal power generation and put their climate pledges into action, describing both countries as “holding the key to future coal demand”. The world’s two largest coal producers – with economies that account for nearly three billion people combined – are currently responsible for two-thirds of coal demand: the dirtiest form of energy.
Both countries were heavily criticised last month for watering down coal pledges at the COP26 climate summit, altering the phrasing of agreed plans to cut coal consumption from “phase out” to “phase down” over the next two decades.
The energy agency argues there is a disconnect between the commitments made by both countries, and their continued reliance on coal energy.
Keisuke Sadamori, director of energy markets and security, said: “The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action.”
Sadamori’s urgent criticism accompanied the IEA’s latest annual coal report, which gloomily revealed that coal power generation has soared to worldwide record levels this year..
Limited investments, climate pledge to keep Australian thermal coal prices high.
Australian thermal coal prices may remain relatively high until 2022-23, hit by a lack of investments on the back of recent climate commitments by several countries at the UN Climate Change Conference, a report by Australia’s Department of Industry, Science, Energy and Resources released Dec. 20 showed.
“Recent commitments by a range of countries have added to uncertainties over coal investment. This is likely to discourage a number of major investors from responding to the recent
price surge, and contribute to a likelihood that thermal coal prices will remain relatively high,” the report showed. “By deterring investment, it is likely that recent announcements could place coal prices on a higher footing.”
Additionally, some proposed coal projects have recently been withdrawn or abandoned, including proposed mines at Dendrobium and the Bylong Valley, the department said in its December quarterly report. The proposed expansion at New Acland continues to face legal objections, with its owners closing the site in response to the depletion of available resources.
“Shenhua’s Watermark project has also been shelved,” the report, which comes via the office of the chief economist, said.
While the report noted there are other potential projects like that of the GVK Group, Waratah Coal’s Alpha North and Galilee projects and AMCI’s South Galilee Coal Project, there has yet to be any commitment registered for these projects.
China imposed an unofficial ban on Australian coal in November 2020 after the latter supported calls for an international investigation into China’s handling of the coronavirus outbreak earlier in the year
Australia’s Newcastle coal vessel queue passes 50
The vessel queue outside Australia's largest coal export facility at Newcastle in New South Wales (NSW) has increased to more than 50, despite an easing of weather conditions since the start of December.
There were 51 ships waiting outside Newcastle today, up from 37 at the start of December and from 14 at the beginning of November. This rapid increase to more than triple the average is despite generally better weather in December after heavy rainfall led to flooding in parts of the NSW coal regions in November. Queensland coal ports are also experiencing above average queues, with 39 vessels waiting outside the neighbouring ports of Hay Point and Dalrymple Bay and 38 outside of Gladstone. Strong winds at Newcastle on 10 December disrupted shipments from both the Port Waratah Coal Services (PWCS) and Newcastle Coal Infrastructure Group (NCIG), adding to the vessel queue. NCIG had shipped under 1.5mn t of coal and PWCS under 3mn t in the first 11 days of December, according to initial shipping data collected by Argus. This puts the port on track to ship less than 13mn t in December, which could be up from 12.16mn t shipped in November but is insufficient to allow its 2021 exports to match those of 2020. Shipments often increase in the second half of December ahead of the end of the calendar year.
The Australian Bureau of Meteorology (BoM) is forecasting a reasonably calm week ahead for Newcastle, with winds of a maximum of 30 km/hr on 16 December compared with up to 63km/hr on 10 December, although there is a chance of thunderstorms during 18-19 December. Disruptive weather is to continue intermittently until February with the BoM calling a La Nina weather pattern, which usually brings increased rainfall and the chance of flooding to NSW.
Glencore to close three Australian coal mines
Switzerland-based trading and mining firm Glencore will close three Australian coal mines when they reach the end of their formal mine lives by the end of 2023, with another awaiting approval to extend beyond 2023.
The firm will close the 5.5mn t/yr Newlands thermal and coking coal mine in the northern Bowen basin in Queensland next year and the 4.5mn t/yr Liddell semi-soft and thermal open pit coal mine and the 2mn t/yr Integra underground thermal coal mine in the Hunter Valley region of New South Wales (NSW) in 2023.
Its 3.7mn t/yr Glendell open pit thermal coal is also scheduled to close in 2023, but its mine life could be extended by 20 years if it is approved. Glencore submitted its plan to the NSW government in January 2020 to expand Glen-
dell to 10mn t/yr and to extend its lifespan by 20 years to 2044.
The four Australian mines that could reach the end of life by 2023 produced 11.79mn t of coal between them in 2020, down from 13.1mn t in 2019 and below a nominal capacity of 15.7mn t, according to Glencore's factsheet. The decline is partly due to Glencore's decision to cut Australian coal production in 2020 due to low prices.
Australia will not need coal-fired power by 2043, market operator predicts
Australia can phase out coal-fired power by 2043 even as electricity demand soars, the energy market operator said on Friday in a draft plan for electricity investments that will be needed to achieve net zero carbon emissions by 2050.
The base case for the Australian Energy Market Operator's (AEMO) plan sees a rapid transformation of the National Electricity Market (NEM) with major investment in renewable generation, energy storage, back-up generation and transmission as coal plants are retired.
"In this scenario, the NEM will operate without coal generation by 2043," AEMO CEO Daniel Westerman said in a statement.
"This requires a substantial increase in battery and pumped-hydro storage, hydrogen or gasfired generation for peak demand, all complemented by a market that incentivises energy users to adjust demand based on system conditions," he said.
The plan would require A$12 billion ($8.6 billion) in network investments, AEMO said in the plan.
The market operator expects electricity consumption from the grid will nearly double to 330 terawatt hours (TWh) as transport, heating, cooking and some industrial processes are electrified over the next three decades.
It forecasts renewable generation capacity will grow to 140 gigawatts (GW) from the current 15 GW, more than doubling every decade to 2050. Separately, rooftop solar is expected to jump to 70 GW from 15 GW over the same period, AEMO said
.Indonesia coal benchmark prices set lower in December- official statement
Indonesia's coal benchmark prices in December were set 25.7% lower compared to a month earlier, the energy ministry said in a statement on Wednesday.
Coal benchmark prices stood at $159.79 per tonne, compared to $215 in November.
The lower price was due to higher Chinese coal production, an energy ministry spokesman said in the statement.
Indonesia’s 2022 coal output is estimated at between 637 million to 664 million tonnes based on production plans currently being finalised, said Sunindyo Suryo Herdadi, a director at the Energy and Mineral Resources ministry.
The figure compared to an output target of 625 million tonnes this year. The domestic needs for coal next year was estimated at 190 million tonnes, Sunindyo said.
Fitch Ratings 2022 Outlook: Indonesian Coal Mining
Fitch Ratings has a neutral outlook on the Indonesian coal sector for 2022. Earnings generation should slow down as selling prices ease from the highs of 2021, while cash accumulation from 2021 should support adequate rating headroom for most companies.
Fitch expects operating profiles to remain the key driver for most ratings. Capex is likely to remain low as organic growth is still slow. Investments might pick up as some miners may continue to look at diversification away from thermal coal to ease out the rising ESG considerations from various funding sources. Fitch revised up its 2022 price assumptions for Australia Newcastle 6,000kcal/kg coal in November
2021, followed by an upward revision of our Indonesian 4,200kcal price estimates, based on the sector’s evolving supply and demand dynamics.
Most coal producers are on Stable Outlook due to wider rating headroom amid strong earnings forecasts into 2022
South Africa: Authorities turn to renewable energy to deal with load shedding
With coal providing 80% of its electricity, South Africa, the continent's most industrialized nation, is now banking on solar power.
\The South African government has awarded 25 contracts for renewable energy projects, worth a total of 50 billion rand, or $2.8 billion, to reduce the country's heavy dependence on coal. The 25 projects (12 wind farms and 13 photovoltaic plants), awarded to the private sector, will increase the country's electricity generation capacity to 2,583 megawatts (MW), or 4.5 percent more than at present, said Energy Minister GwedeManthashe.
Indeed, the country is living with load shedding and the South African electricity company ESKOM, which supplies 90% of households, is sinking under a debt of several billion dollars. As a result, several companies are turning to solar energy with the aim of being 100% dependent on this source by 2025..
Ministry: No potential extra energy from Russia before start of 2022
No additional electricity from Russia will enter the market before the start of 2022 as Baltic system operators have not yet reached an agreement, said Timo Tatar, undersecretary of Energy at the Ministry of Economic Affairs and Communications on Thursday.
"There is no big breakthrough in this respect. The issue has been raised with Lithuania, Lithuania is analyzing what can be done. There is no overnight solution here," he said.
Lithuania suspended the purchase of electricity from Belarus last year as it considers the Astravyats nuclear power plant to be unsafe. The plant is less than 50 kilometers from Vilnius.
As a result, Russia and Belarus' electricity share in the Baltic States decreased by approximately 20 percent.
New Year brings new tax for highearning Russian miners, steelmakers
Russian mining and steel companies are looking forward to the end of a15% export duty on steel in the New Year, but the benefits will be lessened by a hit from a new tax system, designed by the Russian government to tap deeper into metallurgical companies’ earnings when market prices are high.
In January 2022, Russia’s mineral extraction tax (MET) for iron ore will increase significantly, by twofold or more, and tax on coking coal will rise by a minimum of 25%.
The country will also introduce an excise on liquid steel, payable on every ton produced, including unsold volumes. Nevertheless, Russian steel may become more competitive on export markets than it is today. The new taxes follow the expiry of the 15% export duty on steel valid from August to December 2021 that in the current market exceed the sum of the revised MET rates and the new steel excise.
The tax code revisions were prompted by steelmakers’ record high earnings. H1 2021 EBITDA of major steelmaker Evraz doubled on year to $2.1 billion; 9M 2021 EBITDAs of peer companies MMK and NLMK tripled to $3.3 billion and $5.5 billion, respectively.
The new tax hikes have been designed to reflect these extraordinarily high profits and uphold tax revenues after the current export duties on ferrous metals expire.
