12 minute read
Global
Energy crisis revives coal demand and production
High natural gas prices and global competition for the fuel have driven more demand for thermal coal for power generation this year as countries try to wean themselves off Russian energy supplies and seek relatively cheaper alternatives. Some countries are reopening mothballed coal plants to secure enough energy for this winter, while others are boosting production as they seek considerable profits from exports. In Europe, Bosnia and Herzegovina endorsed in March a plan to extend the lifespan of Tuzla 4 and Kakanj 5 coal-fired thermal power plants by the end of 2023. While in Denmark, the government in October ordered Orsted to continue and resume operations at three of its oil and coal-fired power stations to ensure electricity supply. Finnish utility Fortum plans to add 560 megawatt (MW) of capacity by reactivating an idle coal-fired power plant on the country’s west coast. Germany’s cabinet passed two decrees to prolong the operation of sizeable hard coalfired power plants and bring back idled brown coal capacity to boost supply and network reserves.
Advertisement
In Africa’s Botswana, the government has estimated that demand from Europe could reach more than 50,000 tonnes a month. European countries, scrambling to secure alternatives to Russian coal, imported 40 per cent more coal from South Africa’s main export hub in the first five months of this year than over the whole of 2021. Meanwhile, Tanzania expects coal exports to double this year to around 696,773 tonnes, the country’s Mining Commission told Reuters, while production is expected to increase by 50 per cent to about 1.365 million tonnes.
Coal supply to remain strong until at least 2025 – analyst
Seaborne coal volumes are unlikely to decline until at least mid-decade amid continued demand for the fuel, notably in Europe and emerging economies, the head of research at shipbroker Arrow said.
Just under 1bn tonnes of thermal coal was shipped around the globe last year, with volumes this year having already reached just over 800m tonnes, according to estimates from dry bulk data provider DBX.
“The European coal burn will remain very profitable in the medium term and that will require more moving into Europe,” Cetinok said, noting that clean dark spreads – the profit margin for burning coal to producer power – were “astronomically high”.
Coal and gas lower, while petcoke continues upwards, driven by demand from China and India
The same geopolitical factors as last month are dominating the energy markets. The persistently-high inflation is driving the agendas of the central banks with higher interest rates, stating they will push even harder despite a looming recession. As industry and citizens save energy due to the high prices, demand in many markets is contracting sharply.Awaiting new Chinese growth packages, the World Bank cut growth of the world’s largest consumer, China. The oil price is seen in a wide range of US$85-115 driven by geopolitics, recession fears and with OPEC watching.
Coal finally followed the overall energy complex downwards. Europe has been buying erratically to secure fuel stocks for the winter as coal was by far cheapest fuel. Different logistical issues in the export countries kept prices high. ARA stocks are now at an historic high, and the buying spree has dampened amid lower power demand due to the extreme prices and general fall in industrial demand.
Russia has continued selling coal with huge discounts, forcing other producers to lower prices to keep market shares in the countries not taking part of the EU-US sanctions against Russia. The fall of many emerging market currencies to the US dollar has also pushed the coal price downwards. Gas and EUA prices have also fallen, adding to the bearish sentiment.
Shadow Climate & Energy Minister Ted O’Brien says the Australian government needs to stop encouraging the “premature closure of coal fired power stations” when there is “no guarantee of a replacement being there in time”. “They should be ensuring the capacity mechanism is up and running with gas in it,” Mr O’Brien told Sky News host Chris Smith. “They need to start setting up renewables for success, not failure – at the moment they are putting pressure on renewables that defies engineering and economics.”
Coking coal production set to increase in Queensland despite clean energy plan
Queensland will remain a "dominant" exporter of metallurgical coal for years to come despite the state government's clean energy push, a Bowen Basin coal producer says. The Queensland
government recently announced a 10-year clean energy plan, in which it committed to dropping its reliance on coal-fired power by 2035.
Bowen Coking Coal has two metallurgical coal mines in central Queensland, with two more coal projects underway in the region as well.
While demand and price for Australia's metallurgical coal rose to record highs earlier this year, they have since eased, with prices forecast to drop further.According to the federal government's latest Resources and Energy Quarterly report, metallurgical export earnings surged to $66 billion in 2021-22, but were expected to ease to a still high $44 billion by 2023-24.Australia's metallurgical coal exports were also set to reach 180 million tonnes by 2023-24, up from 171 million tonnes in 2020-21.
Floods cut access to Australia’s Whitehaven coal mines
Flooding has cut access to some sites owned by Australian coal mining firm Whitehaven, as the Namoi River burst its banks near the New South Wales towns of Gunnedah and Narrabri.
Whitehaven operates the 12.5mn t/yrMaules Creek thermal and coking coal mine and the 6mn t/yrNarrabri thermal coal mine in the region, while Japan's Idemitsu operates the 7mn t/ yrBoggabri thermal and metallurgical coal mine.
Whitehaven, which saw a dip in its July-September output because of flooding, has been operating helicopters to enable small shift changes while access roads remain flooded and has increased coal haulage using contractors at Maules Creek during dryer periods. Its underground Narrabri mine has fewer operating issues from the rain but still has access problems.
Indonesia identifies 32 coal plants for possible early closure, minister says
Indonesia has identified 32 older-generation coal-fired power plants for possible closure, a step that could help the nation meet its key climate target of net zero emissions by 2060, a senior minister said. This could potentially see some plants closing 5 to 10 years before the end of their operational lifespan.
Indonesia last year set a goal to achieve netzero emissions by 2060 to help limit global warming to 1.5 deg C above pre-industrial levels. Burning coal is the largest source of mankind’s greenhouse gas emissions.
But achieving this target is tough because of generous state subsidies for coal and attractive power purchasing agreements with plant owners. The nation remains heavily reliant on subsidised coal for power generation and also offers power purchasing contracts that guarantee a fixed fee to some plant owners regardless of the amount of power they generate. Indonesia and the Philippines have backed a pilot programme by the ADB, which the bank says has the potential to be one of the biggest carbon reduction programmes in the world.
Indonesian Coal Export to European Union Country Soars Ahead of winter
Indonesia's coal exports to European Union countries had increased throughout September, which coincides with the upcoming winter season. The highest increase in coal exports was recorded for shipments to Poland.
Indonesia's cumulative exports in the period between January to September increased by 33.49 percent when compared to the same period the previous year to US$ 219.35 billion. Exports were supported by a 33.21 percent increase in non-oil and gas exports to US$ 207.19 billion.
Meanwhile, the largest share of non-oil and gas exports during the period between January to September comprises mineral fuels and fats, as well as vegetable animal oils. Mineral fuel has a value of US$ 39.88 billion or a 19.25 percent share
South Africa, Indonesia get $1bn to close coal plants
South Africa and Indonesia will receive a combined $1-billion from the Climate Investment Funds to replace some of their coal-fired power plants with renewable energy facilities, part of global efforts to cut planet-warming emissions.
The allocation of $500-million each to the coaldependent countries will come in the form of “concessional,” or low cost, finance, the World Bank-affiliated fund said in a statement.
In South Africa, the money will be used to close coal-fired electricity stations and replace them with renewable energy plants and battery storage systems, it said. Over the next eight years, South Africa needs $60-billion in investments to effect the transition” away from coal, Barbara Creecy, South Africa’s environment minister, said.
South Africa is also negotiating $8.5-billion in climate finance as part of an agreement with the US, UK, Germany, France and the European Union known as the Just Energy Transition Partnership.
Europe’s Coal Price Jumps as South Africa Strike Curbs Supply
The price of importing coal to Europe’s largest ports rose the most since May as a strike in South Africa curtails shipments of the fuel during the middle of an energy crisis.
South Africa’s troubles dovetail with those of European power producers, who are trying to stock up on coal ahead of winter to make up for dwindling supplies of natural gas from Russia. Traders are relying increasingly on South Africa because European Union sanctions ban purchases from Russia, long the continent’s largest source.
Month-ahead European coal futures rose as much as 11%. They’re now trading at about $290 per ton, rebounding from an almost sevenmonth low on Oct. 10. The jump also may be driven by traders covering shorts or profit-taking after a long decline, Claude said.
Coal exports to Europe from a consortium that owns the Richards Bay Coal Terminal in South Africa increased to 4.1 million tons in the first half of 2022, compared with 500,000 tons a year earlier, Thungela Resources Ltd. Chief Financial Officer Deon Smith said in August.
Infrastructure bottlenecks hamper Russia's booming coal exports to China
Russian coal exports to energy-hungry China have jumped by about a third this year but the supply boom is being constrained by transport infrastructure limitations, industry sources and officials said.
The Kremlin plans to increase its energy supplies to Asia, China in particular, to offset a slump in exports to the West, which has imposed sanctions on Russia over the conflict in Ukraine.
Russia is the world's sixth-largest coal producer and one of top coal exporters, along with Indonesia and Australia. Its share of global coal exports reached 17% last year with supply of 223 million tonnes. But now with more exports heading east towards Asia as opposed to west towards Europe, bottlenecks are appearing.
Russian First Deputy Prime Minister Andrei Belousov has acknowledged the problem with infrastructure constraints, saying this
month that the situation with coal exports and congestion on the rail system had not stabilised, though it was improving.
Russian coal exports down, tonne-miles up
The EU’s import ban began on August 10, 2022 and in the almost two months since, Russia’s coal export volumes were down 7% year-onyear and 5% year to date, the association said.
With the EU off-limits, Russia has had to look further afield for coal consumers, leading to a near-30% increase in tonne-mile demand, despite the lower volumes. The average haul for Russian coal has risen by almost 50% since sanctions were announced in April.
“So far, capesizes have seen the biggest increase in tonne miles following the ban, largely due to India’s increased interest in discounted Russian coal. India’s government mandated an increase in coal imports over the summer, due to a surge in energy demand and low coal inventories. This resulted in a boost to tonne miles as capesizes laden with Russian coal from European ports sailed around Africa,” says Filipe Gouveia, Shipping Analyst at Bimco.
German leader warns against 'worldwide renaissance' for coal
German Chancellor Olaf Scholz said that Russia's war in Ukraine mustn't lead to a “worldwide renaissance” for coal — comments that come as Germany itself brings coal-fired power plants back online in an effort to prevent an energy crunch this winter.
In a speech to parliament, Scholz highlighted his government's efforts to counter the effects of Russia's decision to cut off gas supplies to Germany. The government has in recent months approved reactivating several coal- and oil-fired power plants, and environmental activists warn that Germany risks defaulting on its climate goals by burning more fossil fuels.
Scholz said five further plants that use lignite, a low-quality and high-emission type of coal, have gone back online in recent days “as a timelimited but necessary emergency measure.” The chancellor this month also decided to keep Germany's last three nuclear power plants, which originally were supposed to be switched off at the end of the year, running until mid-April
Coal shipments to U.S. power plants fell by more than half between 2010 and 2021
U.S. power plants received 449 million short tons (MMst) of coal in 2021, less than half of the 957 MMst they received in 2010. Coal shipments to U.S. power plants declined over the past decade as coal-fired generation in the country fell and coal-fired power plants shut down.
Although coal shipments have been trending down over the past decade, 2021 shipments increased 5% from 2020 because coal-fired generation increased. In 2021, coal-fired generation rose for the first time since 2014 because of higher electricity demand and higher natural gas prices versus relatively stable coal prices.
A power plant’s location and the cost-efficiency of the shipping method primarily determine how it receives its coal. Minemouth coal-fired power plants—or plants that are built beside coal mines—receive coal directly from the adjacent mine, usually through a long conveyor belt. Minemouth shipments accounted for 8% of coal shipments to power plants in 2021, compared with 6% in 2010
US based miner Arch redirecting coking coal into thermal market
US based coal miner Arch Resources is actively exploring opportunities to redirect coking coal to thermal markets, CEO Paul Lang said, as global prices of thermal coal continue to remain near historic highs. He said the group believed the fourth-quarter shipments could serve to garner further thermal market interest in its high BTU coking coal products.
The company has sold more than 200 000 t of metallurgical coal to thermal customers for delivery in the fourth quarter and COO John Drexler added in a conference call that Arch was working hard on identifying more crossover opportunities.
“We remain staunchly committed to serving the metallurgical needs of our longstanding steel customers, but we are also happy to redirect tons to thermal customers in the absence of more value creating alternatives in the steel arena,” Drexler said
.Coal association opposes natural gas initiative
An initiative to push for natural gas rather than coal to aid European allies has drawn fire from the West Virginia Coal Association.
“Our European allies are struggling to acquire the fuel they’ll need for consumer home heating and industrial purposes,” he said. “They require all means necessary – coal, gas and intermittent sources – to power their economies for the foreseeable future. Calling for the eradication of coal is nothing more than a political hook on their part to incentivize gas pipeline development in America.”
The group of natural gas production and transmission companies, led by EQT, TC Energy and Williams Company, launched PAGE with the goal to “replace foreign coal with a reliable, affordable supply of cleaner U.S. natural gas,” Hamilton said.
