Australian thermal coal exports to China have plunged 35% to date this year, with one economist this week predicting exports could be at virtually nothing within five years.
Tom Pugh, commodities economist from Capital Economics, forecast China is moving more rapidly than predicted to domestic coal. The shift to renewables and uranium is up 45% this year.
Shipments of coal out of the world’s biggest thermal port of Newcastle have continued to fall in recent weeks. Port weekly operations reports listed 24 coal ships for the last week in September, down from 31 and 33 the previous weeks.
Speaking at the American Chamber of Commerce presentation in Brisbane in September, Mike Henry, president of the coal division at BHP Billiton, said industry research showed a widespread public view that coal would be phased out over the next 10-20 years in favour of renewables.
While he disagreed with this timeframe or intensity of the decline, he acknowledged BHP was already weighting towards steel making or metallurgical coal.
“Climate change has been on the radar and part of the company’s strategy for two decades now,” said Henry. “Our most likely scenarios, aligned to emerging climate change policies [for thermal coal], range from flat to slightly growing demand through to slightly declining demand over the same time horizon.”
There were no practical substitutes for metallurgical coal in the steel making process, however.
“The demand uncertainty associated with substitution is less for met coal than it is for thermal coal,” said Henry.
Australia is the world’s largest exporter of metallurgical coal. While demand and prices for this commodity have also been in sharp decline, this is widely regarded as cyclical. Along with iron ore, met coal is expected to pick up as economic growth in China, India, southeast Asia, the Middle East, and Africa rebound.
Growth in steel production is expected to peak between 935-985 Mt in the mid-2020s,” said Henry.
Greg Evans, executive director, Coal, Minerals Council of Australia, however, rejected the notion that thermal coal is in decline. He told IHS Maritime that while figures show a softening of China’s thermal coal imports this year, overall, coal use in China is expected to increase in the medium term.
“China has 123 gigawatts of coal-fired electricity generation under construction or approved,” he said. “Future demand for Australian coal is expected to be positive through Asia with the greater use of high efficient low emission (HELE) technology in coal-fired generation.”