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© OECD/IEA 2017
Coal 2017Analysis and Forecast to 2022Keisuke Sadamori. Director Energy Markets and SecurityIEEJ Tokyo, December 2017
IEA
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Coal markets update
• 2014-2016 marks the largest 2-year drop in global coal demand- The drop occurred in spite of economic growth
• 2016 was the 3rd consecutive year of decline in China and in US- Coal to gas switch in power generation in US and Europe, and in industrial/residential
sector in China together with renewables were the drivers
• India and ASEAN region remained centres of growth- Increasing power demand to support economic/ social development underpins coal use
• A coal demand rebound is expected in 2017 led by China, India and US- Prices have remained strong throughout the year.
• Is this rebound a blip or a new trend?
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Whereas power dynamics are country-specific, sluggish power demand, cheaper gas and renewables expansion are squeezing coal in many countries across the globe
Power systems are in transformation
Change in coal power generation, 2012-16
0
50
100
150
200
Coalgeneration
2012
Demandgrowth
Renewables Natural gas Nuclear &others
Coalgeneration
2016
TWh
United Kingdom
0
500
1,000
1,500
2,000
Coalgeneration
2012
Demandgrowth
Renewables Natural gas Nuclear &others
Coalgeneration
2016
TWh
United States
0
100
200
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400
Coalgeneration
2012
Demandgrowth
Renewables Natural gas Nuclear &others
Coalgeneration
2016
TWh
Germany
0
2,000
4,000
6,000
Coalgeneration
2012
Demandgrowth
Renewables Natural gas Nuclear &others
Coalgeneration
2016
TWh
China
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Some populated countries with low per capita power consumption will ramp up power generation. Coal will provide a good share of the additional electricity
Per capita power demand in select countries compared with OECD and world average
But power demand growth is not over
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 3,450
kWh/
capi
ta
Millions of inhabitants
Bangladesh Pakistan Indonesia India China
World average
OECD average
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Increasing China coal demand and imports in 2017 have been pushing prices up
Weekly thermal coal prices in Europe
Will (when) prices start correction?
0
20
40
60
80
100
120U
SD/t
Spot prices Forward curve in January 2016
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Chinese policies targeting the green range gives a strong support international prices to stay within an equivalent margin
Prices in Europe and China vs targets
A new force to drive prices
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USD
/t
CNY/
t
Bohai-Rim steam-coal Northwest Europe (ARA) (right axis)
Correlation92 %
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
The volatility of spot coking coal prices shows the fragility of its supply chain
Spot prices of thermal, PCI and hard coking coal in Australia
Coking coal prices: two spikes in half a year
0
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350
Jan/
13
Mar
/13
May
/13
Jul/1
3
Sep/
13
Nov
/13
Jan/
14
Mar
/14
May
/14
Jul/1
4
Sep/
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Nov
/14
Jan/
15
Mar
/15
May
/15
Jul/1
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Sep/
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Nov
/15
Jan/
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Mar
/16
May
/16
Jul/1
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Sep/
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Nov
/16
Jan/
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Mar
/17
May
/17
Jul/1
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Sep/
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Nov
/17
USD
/t
Newcastle Australian prime hard coking Australian ULV PCI
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
After the staggering growth in 2000-2013 and the decline thereafter, coal demand will stabilize at the current level
Coal demand forecast 2016-22
Global coal demand stagnates
0
1,000
2,000
3,000
4,000
5,000
6,000
2015 2016 2017 2018 2019 2020 2021 2022
Mtc
eTotal demand
China
India
ASEANUnited StatesEuropean Union
Other
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Whereas further development of UHV lines will move demand from coastal areas to the West and North, coal boilers will be replaced by gas and electrical solutions
The geography of coal demand does matter
UHV under construction
Beijing-Tianjin-Hebei
23
Pearl river delta(Guangdong)
7
37
Yangtze river delta andother Eastern China
Other regions
43
Annual coal consumption in boilers to be phased out (Mt)
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Looking ahead, performance of Coal India is key
Coal imports avoided since 2013
Increasing production in India is impacting international markets
0
10
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30
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60
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2013 2014 2015 2016
Mt
Solar + wind Domestic coal production
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
After closure of high-cost mines and inefficient coal power units, the decline of the coal generation will slow down. Gas prices are key
Coal capacity additions and coal power generation in US
Remaining US coal is gaining resilience
0
500
1,000
1,500
2,000
2,500
-20
-15
-10
-5
0
5
10
15
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
TWh
GW
New capacity Retired capacity Net capacity addition Coal generation (right axis)
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Traditional uncertainty about China’s imports has spread to many other countries.
Difference in thermal coal exports/imports by country (2016-2022)
Thermal coal trade in contraction with many caveats
650
670
690
710
730
750
770
790
810
830
850
Mtc
e
Imports Exports
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
CCUS is making real progress
Quest ‐ Scotford Upgrader(Source: Shell)
Al Reyadah(Source: CSLF)
Petra Nova(Source: NRG)
Illinois Industrial CCS(Source: ADM)
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
CCUS is making real progress
• CCUS installed on existing assets which have sustainable business model
• Low technology risk (“keep it simple” approach)
• Attractive, well understood storage geology or enhanced oil recovery opportunity
• Coalition of public and private stakeholders
• Clear source of revenue to cover CCUS costs over asset lifetime
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
The IEA, key countries and the world’s largest energy companies have shared a commitment to advance CCUS
Despite recent progress, CCUS needs a boost
IEEJ：January 2018 © IEEJ2018
© OECD/IEA 2017
Where are coal markets going?
• Global coal demand is set to stagnate through 2022 - Forecast remains fundamentally the same as the last year’s forecast
• Coal demand in China will decline slowly, with annual fluctuations determined by market needs- In 2017, economic rebounding and low hydro output are driving coal demand growth in China after three years of
decline
• Growth will be concentrated in India, Southeast Asia and a few other Asian countries- Despite renewable push and lower gas prices, additional power demand will be partially met by coal
• Global trade could contract, but uncertainty is at highest- Imports increase in China and Korea in 2017 are not sustainable; India’s success to rein in imports will be key
• Coal use will be constrained in the longer term without Carbon Capture, Utilisation and Storage- CCUS is needed to meet our climate ambitions. The IEA is working to engage industry and policymakers to build new
momentum.
IEEJ：January 2018 © IEEJ2018
