© OECD/IEA 2018

Coal 2018 Analysis and Forecasts to 2023

Keisuke Sadamori – Director, Energy Markets and Security

Jakarta, 18th December 2018

IEA

© OECD/IEA 2018

Coal market update

• After two years of decline, global coal demand grew in 2017 and is estimated to increase further again in 2018

• Coal demand grew strongly in India, Southeast Asian countries and Korea in 2017, while decline continued in Europe and North America

• With seaborne thermal coal trade growing and no large new mining capacity, prices remain high

• High prices pushed up coal production in price sensitive exporters, particularly the US (up 6.3%) and Indonesia (up 5.2%)

• Climate and air quality regulations, divestment campaigns, phase out policies, declining costs of renewables and more abundant gas are all putting additional pressure on coal

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2017, when growths were bigger than declines again

Whereas growth is mostly in Asia and decline in Europe, United States is in a very particular position

-40

-20

0

20

40

60

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100

120

Mt

2017-2016 difference in coal consumption (left) and production (right)

-20

-10

0

10

20

30

40

50

60

Mt

© OECD/IEA 2018

Prices remain high

Sustained demand, Chinese supply side reforms and lack of investment in coal mining underpinned

high prices

0

50

100

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300

350

USD/t

Newcastle (6000 kcal) Australian LV PCI Australian prime hard coking

Thermal and coking coal price indices, 2015-18

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China is still the price setter in international markets

The comfort zone for the Chinese producers and consumers is the global reference for international

coal prices

300

400

500

600

700

800RMB/t

Qinhuangdao FOB price Bohai-Rim steam-coal price index

Coal prices (6000 kcal/kg) in China

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Despite numerous policy changes and announcements,

the forecast of coal demand is almost unchanged compared with last year’s forecast

Comparison between Coal 2017 and Coal 2018 global coal demand forecasts

Much talk but not much change

IEA statistics (continuous line) and IEA forecast (dotted line)

3000

3500

4000

4500

5000

5500

6000

Mtc

e

Coal 2017 report Coal 2018 report

© OECD/IEA 2018

One planet, two coal worlds

India and southeast Asia will lead coal demand growth while it will continue to decline in

Europe and United States

0

500

1000

1500

2000

2500

3000

US EU-28 Japan Korea China India Southeast Asia

Mtc

e

2000 2017 2023

Coal demand in select countries/regions in 2000, 2017 and 2023 (forecast)

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Understanding China to understand coal

Power

Small industrial and residential

Heavy industry

Coal conversion

Four largest coal consuming sectors in China follow different trends

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Fight for blue skies

Phase out of coal boilers and stoves in China pushed up LNG prices all over the world.

In an interconnected world, Chinese coal is at the centre of the energy stage.

Beijing-Tianjin-Hebei

23

Pearl riv er delta

(Guangdong)

7

37

Yangtze riv er delta and

other Eastern China

Other regions

43

Coal (Mt) saved in industrial boilers, 2017-22

LNG spot prices

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

Jul-

17

Au

g-17

Sep

-17

Oct

-17

Nov

-17

Dec

-17

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-

18

Aug

-18

Sep

-18

Oct

-18

Nov

-18

China UK France Spain TTF

Source: IEA Coal 2017

© OECD/IEA 2018

Whereas the structural transformation of the Chinese economy is unequivocal, and “blue skies” remains the

policy priority, electricity demand is boosted by air quality policies, growing middle class and other factors

GDP, power demand and coal generation growth in China

China’s path to a less energy intensive economy

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP growth Total generation growth Coal generation growth

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP growth (6 year average) Power growth (6 years average) Coal generation growth (6 years average)

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Dominance of Chinese power sector in global coal market

Changes in Chinese power demand and hydro output have a significant impact on global coal demand.

Relationship between global coal demand and hydro generation/power demand in China

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Glo

ba

l c

oa

l d

em

an

d in

cre

ase

Hydro output or power demand growth

China hydro

output growth

China power

demand growth

© OECD/IEA 2018

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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1200

1400

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1800

1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023

TWh

Coal-fired generation (TWh) Share coal (%) Share renewables (%)

Coal power generation in India is set to continue to grow

Coal has been a cornerstone of India’s power system.

Renewables and more efficient coal plants reduce the forecast rate of growth.

Forecast

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Coal for power will be the driver of demand growth in southeast Asia

Increasing use of coal for electricity will push up consumption in some of the countries in southeast Asia

(Indonesia, Vietnam, Philippines and Malaysia)

Forecast

Electricity generation by source in southeast Asia

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100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

TWh

Renewables Coal Others

© OECD/IEA 2018

(Western) EU on its way out of coal

Phase-out policies are broadly announced and implemented in EU countries.

The challenge imposed by the end of coal-based electricity is country-specific

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Coal’s share in Power GenerationCoal phase out in EU-28

Cyprus, Belgium, Estonia, Latvia, Lithuania, Luxembourg and Malta do not have coal power plants in operationNo coal power Phase out announced

Phase out under discussion

No phase out

© OECD/IEA 2018

0

50

100

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350

400

450

2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022* 2023*

Mt

Indonesia

Australia

Russia

Colombia

South AfricaUnited States

Low investment due to uncertain demand

Russia’s infrastructure expansion will support export growth.

United States and Indonesia will continue to be the most price sensitive exporters

The evolut ion of exports from six major thermal coal exporters between 2011 and 2023

*Forecast

Forecast

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International CCUS Summit, Edinburgh

UK and IEA hosted 50 senior delegates from across government, industry and the finance sector to

support new momentum for CCUS

© OECD/IEA 2018

Key messages

• Global coal demand through 2023 set to be stable, as growth in India and other Asian countries will offset decline in Europe and US

• China remains the key player in coal market. The rise of power demand in China, the main driver of a recent global coal rebound, will likely slow down in the coming years; but uncertainties remain

• Despite high prices, investment in new mines remains low. Uncertain demand for imported coal, risks associated with climate policy and local opposition have cooled investors’ appetites

• One planet, two coal worlds. In one world, closing coal power plants is a key climate policy. In the other, coal will play a continuing role thanks to its affordability and local availability. Carbon capture, utilization and storage is the bridge between the two worlds

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