© OECD/IEA 2017

Coal 2017 Analysis and Forecast to 2022

Keisuke Sadamori. Director Energy Markets and Security

New Delhi, 18th December 2017

IEA

© 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 the 2nd 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?

© 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

Coal

generation

2012

Demand

growth

Renewables Natural gas Nuclear &

others

Coal

generation

2016

TW

h

United Kingdom

0

500

1,000

1,500

2,000

Coal

generation

2012

Demand

growth

Renewables Natural gas Nuclear &

others

Coal

generation

2016

TW

h

United States

0

100

200

300

400

Coal

generation

2012

Demand

growth

Renewables Natural gas Nuclear &

others

Coal

generation

2016

TW

h

Germany

0

2,000

4,000

6,000

Coal

generation

2012

Demand

growth

Renewables Natural gas Nuclear &

others

Coal

generation

2016

TW

h

China

© OECD/IEA 2017

Some populated countries with low per capita power consumption will ramp up power generation. In a

few of them, 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 3,700

kW

h/c

ap

ita

Millions of inhabitants

Bangladesh Pakistan Asean India China

World average

OECD average

© 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

120

US

D/t

Spot prices Forward curve in January 2016

© 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

0

20

40

60

80

100

120

200

300

400

500

600

700

800

US

D/t

CN

Y/t

Bohai-Rim steam-coal Northwest Europe (ARA) (right axis)

Correlation

92 %

© 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

50

100

150

200

250

300

350

Jan

-13

Mar-

13

May-1

3

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar-

14

May-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar-

15

May-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar-

16

May-1

6

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar-

17

May-1

7

Jul-

17

Sep

-17

No

v-1

7

US

D/t

Newcastle Australian prime hard coking Australian ULV PCI

© 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

e

Total demand

China

India

ASEAN

United States

European Union

Other

© 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 and

other Eastern China

Other regions

43

Annual coal consumption in

boilers to be phased out (Mt)

© 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

20

30

40

50

60

70

80

90

2013 2014 2015 2016

Mt

Solar + wind Domestic coal production

© 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

TW

h

GW

New capacity Retired capacity Net capacity addition Coal generation (right axis)

© 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

© 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)

© 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

© 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

© 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.

© OECD/IEA 2017

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