Medium-Term Coal Market Report 2014 3 Foreword
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COAL Medium-Term Market Report 2014 Market Analysis and Forecasts to 2019 Please note that this PDF is subject to specific restrictions that limit its use and 2014 distribution. The terms and conditions are available online at www.iea.org/t&c/ OECD/IEA, © 2014 OECD/IEA, © COAL Medium-Term Market Report 2014 Market Analysis and Forecasts to 2019 2014 OECD/IEA, © INTERNATIONAL ENERGY AGENCY The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Japan Secure Sustainable Together Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2014 Spain International Energy Agency Sweden 9 rue de la Fédération Switzerland 75739 Paris Cedex 15, France Turkey www.iea.org United Kingdom 2014 Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are available online at also participates in OECD/IEA, http://www.iea.org/termsandconditionsuseandcopyright/ the work of the IEA. © FOREWORD FOREWORD Every year in December, before the New Year’s break but after the UN Conference of Parties climate negotiations, the International Energy Agency (IEA) publication, Medium-Term Coal Market Report (MCTMR), brings the latest trends and forecast for the next five years for coal supply, demand and trade. Despite the public image of a dying industry, coal is still the backbone of electricity generation worldwide – not to mention steel production – and produces more than 40% of power generated worldwide. Coal is abundant and affordable, it is easy to store and transport, and there are no geopolitical issues in the coal supply chain. Pulverised coal is a very well-known and reliable technology, and, with increasing flexibility in new designs, it can complement renewable generation as well as maintain its traditional role as base-load generation. However, the undeniable positive contribution of coal to energy supply and, thus, to energy security cannot hide the negative environmental implications of coal use, especially on air quality in some places and on climate change globally. Previous MTCMRs warned that, as it is used today, coal is simply unsustainable. And things have not improved much since. On average, plants are more efficient and emit fewer pollutants, but this does not mean that we are on track. Many cities in China (but not only there) suffer from pollution caused by NOx, sulphur and particles from coal burning. While the technology exists to produce cleaner electricity from coal (two-thirds of coal is used in power production), the technical, economic and regulatory reality is often different, and emissions from many coal plants often include unacceptable levels of these pollutants. This year, we have welcomed the start of the first large-scale carbon capture and storage (CCS) power station project (or CCUS – carbon capture, use and storage – since carbon dioxide (CO2) is used for enhanced oil recovery) in Boundary Dam (Canada). We acknowledge the project as a milestone, but must also note how far we are from the CCS targets required for broader uptake and deployment. Every year, both coal-related and global CO2 emissions increase, and, in accordance with the projections presented in this report, this trend will continue until 2019. Coal consumption follows the current economic and energy growth trends, with a continuous shift to Asia. China, despite having entered a more moderate growth path, will continue to account for the largest share of coal demand growth to 2019. India and the countries comprising the Association of Southeast Asian Nations (ASEAN) countries’ growth will be remarkable, and our projections suggest that India will become the largest importer of thermal coal. However, its scale is not comparable with China. For example, the daily 200 MW of coal generation capacity that China has been adding for almost a decade is something unique that will not be duplicated anywhere anytime. Our projections assume that India will add less than one-third of this. In the OECD area, we see different trends. In the United States, cheap gas, together with stricter environmental legislation, continue to push coal out of the system. In Europe, which is more policy driven, we forecast coal demand declining in the outlook period. However, in OECD Asia, increasing coal-power generation capacity in Japan and Korea together with favourable coal prices compared to gas will give rise to coal demand increases. Whereas probable export-oriented projects are estimated at 100 Mt, with the potential projects reaching as much as 400 Mt, at current coal prices, there is no incentive for most of these projects to MEDIUM-TERM COAL MARKET REPORT 2014 3 2014 OECD/IEA, © FOREWORD come online. On the other hand, low prices improve coal competitiveness and encourage higher demand mainly at the expense of gas. The million-dollar question is how long markets will be oversupplied, and how long producers can stand at current prices. Market evolution will depend on Chinese dynamics, and hence, producers, consumers, analysts and other stakeholders need to keep an eye on China. In addition to the projections shown in this Medium-Term Coal Market Report 2014, long-term IEA projections suggest that the world will remain dependent on coal until 2050 and beyond. Therefore, the final call of this Foreword is to re-emphasise the need to consume coal in a cleaner, more efficient way and to accelerate the development of carbon capture and storage. This publication is produced under my authority as Executive Director of the IEA. Maria van der Hoeven Executive Director International Energy Agency 4 MEDIUM-TERM COAL MARKET REPORT 2014 2014 OECD/IEA, © ACKNOWLEDGEMENTS ACKNOWLEDGEMENTS The Medium-Term Coal Market Report 2014 was prepared by the Gas, Coal and Power Division (GCP) of the International Energy Agency (IEA), headed by László Varró. The report was managed and co-ordinated by Carlos Fernández Alvarez. Raimund Malischek, Harald Hecking and Carlos Fernández Alvarez are the authors. Keisuke Sadamori, Director of the IEA Energy Markets and Security (EMS) Directorate, provided expert guidance and advice. We are grateful for the data provided by the IEA Energy Data Centre (EDC). Julian Smith’s assistance in aggregating and making the data user-friendly was invaluable. Many colleagues from the IEA provided us with important advice and input: Simon Bennet, Keith Burnard, Farid Hussin, Ellina Levina, Paweł Olejarnik, Rodrigo Pinto Scholtbach, Tristan Stanley, Johannes Trüby, Christelle Verstraeten and Takuro Yamamoto. Rebekah Folsom edited the report. The IEA Communication and Information Office (CIO) also provided editorial and production guidance. Rebecca Gaghen, Muriel Custodio, Angela Gosmann, Astrid Dumond, Therese Walsh and Bertrand Sadin made this publication possible. Wood MacKenzie provided with invaluable data and information for this report. Our gratitude goes to the Institute of Energy Economics (EWI) at the University of Cologne for sharing its breadth of coal expertise and coal market models. The IEA would like to thank the Coal Industry Advisory Board (CIAB) for their support. Special thanks go to the many CIAB associates and analysts who provided the IEA with timely data, information and advice. Nikki Fisher from Anglo American, Jeffrey Phillips from EPRI, J. Gordon Stephens from Joy Global Inc., John Lowell from Arch Coal Inc., Rick Axthelm from Alpha Natural Resources Inc., Peter Morris, from the Minerals Council of Australia, Itaru Nakamura and Naoki Ueda from J-POWER, Svetlana Petrova from the Siberian Coal Energy Company (SUEK), Prach Chongkittisakul from Banpu Public Co. Ltd, Roland Luebke from German Coal Association, Maggi Rademacher from E.On Generation GmbH, Hans-Wilhelm Schiffer from RWE AG, Veronika Kohler, from US National Mining Association as well as Brian Heath, Executive Co-ordinator of the CIAB.