World coal trade - steelmaking impact - 2009 review

Asia

Asia poses a large area of uncertainty for world coal trade projections. In particular, China has the potential to influence the market both as an importer and as an exporter. For example, a significant increase in China’s coal imports could put upward pressure on world coal prices. In the IEO2009 reference case, China’s coal imports total 3.3 quadrillion Btu and its exports total 1.0 quadrillion Btu in 2030. Even with a substantial increase in imports, however, most of the coal consumed in China will continue to be supplied by its own coal mines.

India’s coal imports in 2030 are projected to be three times the 2007 level, spurred by rising imports of both coking and steam coal. India's large electricity plants planned for coastal areas are to be fueled by imported steam coal. In light of current limits on available global investment capital and the size and associated risk of the projects, however, it is uncertain whether India’s mega-size coal plants will meet their original timelines. The Indian government is trying to accelerate investment in generation and infrastructure, but recent solicitations have resulted in fewer bids than expected. Planned investments in India also include port expansions at Paradip and Goa.

India has domestic resources of coking coal, but their quality is poor in comparison with foreign-sourced coking coal. India’s long-term plans include expansion of its steel industry to between 165 and 198 million tons of crude steel output by 2020, up from about 59 million tons in 2007, with increased imports of coking coal supporting the expansion. Growth in steel production is necessary for India to expand and improve infrastructure essential for economic development.

Although 2001 marked the final year of significant Japanese coal production, Japan has continued to rely on coal and is expected to remain the world’s largest coal importer in most years of the projection. Australia provides for about 60 percent of Japan’s coal supply (both steam and metallurgical coal), and China supplies about 20 percent of its steam coal imports. Japan’s purchases of coal from Indonesia increased by 157 percent between 2000 and 2007. Japanese companies also have pursued investments in coal production in other countries, including Russia and Canada.

Because Japan lacks significant resources of its own, it is likely to continue seeking diverse sources of long-term supply even during the global economic recession. In the short term, however, Japan (along with other countries that import coking coal) reportedly is trying to cut back on contracted imports of coking coal. Japan is a leader in steel production, ranking second only to China among world steel producers, and is projected to continue to import coking coal for use in its steelmaking plants in 2030.

South Korea also is expected to continue importing most of the coal it consumes. With planned increases in coal-fired generating capacity, South Korea and Taiwan together are projected to maintain a share of world imports at about 16 percent in 2030 despite sizable increases in coal imports by other countries.

Europe, Middle East, and Africa

In the IEO2009 reference case, total coal imports to the Europe / Mediterranean market (including the Middle East and Africa) in 2030 are slightly above 2007 levels. With most European countries placing greater emphasis on natural gas in their power sectors, coal becomes a less significant component of the fuel mix for electricity generation. In Turkey, however, electricity demand and steel industry growth are projected to offset some of the decline in Europe’s coal imports. Italy’s conversion of power plants from oil to coal also is projected to increase its coal imports, and Germany’s planned closure of its remaining hard coal mines by 2018 is expected to result in increasing imports of coal for electricity generation. Europe’s demand for lower sulfur coal (from South America and Eurasia, for example) will be tempered over time by the gradual addition of flue gas desulfurization equipment at existing coal-fired power plants. In the Middle East, Israel accounts for the largest portion of the increase in coal imports over the projection period as it expands its use of coal-fired generation.

The Americas

In the mid- to long term, port expansions are expected to facilitate U.S. coal imports, which increase by about 1.1 quadrillion Btu from 2007 to 2030. In 2008, Kinder Morgan Energy Partners LP completed an expansion of annual capacity at its import terminal in Newport News, Virginia, by 6 million tons (about 0.4 quadrillion Btu); and in late 2009, it received an air permit enabling it to expand its coal terminal in Jacksonville, Florida. Although imports remain a relatively small share of U.S. coal consumption in 2030 (4 percent), the increase represents a shift for the United States from a net exporter of coal to a net importer. With declining productivity and mining difficulties in Central Appalachia and rising domestic demand for coal, imports are expected to become increasingly competitive for coastal States in the East and Southeast. South America (Colombia, in particular) is expected to be an important source of U.S. coal imports.

Canada has been the largest importer of U.S. coal in recent years, but exports of U.S. steam coal to Canada in 2030 are projected to fall below their 2007 level. A portion of Ontario’s coal-fired generating capacity is expected to be shut down over the projection period for environmental reasons, as legislated by the Provincial government.

Brazil’s steelmaking capacity is projected to more than double by 2018, to 88 million tons from 37 million tons in 2007. With rich reserves of iron ore but no coking-grade coal, Brazil’s steel industry will need more imports of coking coal from Australia, Canada, the United States, and southern Africa. Overall, South America’s imports of coking coal - driven primarily by demand in Brazil - are projected to grow from about 0.4 quadrillion Btu in 2007 to 0.9 quadrillion Btu in 2030.

Source: U.S. Energy Information Administration [Feb 2010]
See http://www.eia.doe.gov/oiaf/ieo/coal.html