Stormy seas ahead for coal markets

Those involved in the utility industries and who are concerned about electricity and gas prices will be interested to know the current state of the coal industry locally and abroad.

According to a new report released by Deutsche Bank Markets Research, thermal seaborne coal markets face stormy seas moving into the future.

The World Coal Association defines thermal seaborne coal as any thermal coal transported to the importing country via ships. 

This is made up of two major international markets. The first is the Atlantic market, which encompasses importing countries in Western Europe, such as the UK, Germany and Spain.

Then there is the Pacific market, which is made up many developing Asian importers, such as Japan and Korea.

Australia is one of the world's largest coal exporters, making a significant contribution to the global market.

The Deutsche Bank Markets Research report, Thermal Coal: Coal At A Crossroads, released on May 9, forecasts that in the medium to long term, thermal seaborne coal markets face steadily growing supply in large producing regions, which consuming regions will level out or decline.

China, Europe and the US are three traditional big centres of demand which may quieten down, while the export capability of the US has the potential to grow.

This is likely to result in many major expansion projects being delayed, as existing capacity will be able to meet the demand.

Europe has in place a number of emissions policies, and this will drive closures in coal-fired generation over the next five years as renewable energy production increases.

In the US, air pollution regulation will bring down the demand for coal from the electricity market, although rising gas prices will shelter from this effect somewhat.

For China, a lower growth target mixed with a goal to reduce the energy intensity of its GDP growth means a lessened goal demand.

As for Australia, with the announcement of the May 14 federal budget, the Australian Coal Coalition has released a statement outlining its disappointment with the announcements relating to coal.

"With around 9,000 jobs lost in the last 12 to 15 months and the recent postponement of multi-billion dollar projects, a priority for the government should have been to build Australian industry’s competitiveness and productivity," said the acting chief executive officer of the Australian Coal Association, Greg Sullivan.

"Instead this government has delivered more tax, more regulation and more uncertainty. This simply adds up to fewer jobs, less growth and less investment for the future."

Posted by Charlie Moore