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OCTOBER 2017 - VOLUME 26 NUMBER 9 ®
OCTOBER 2017 - VOLUME 26 NUMBER 9
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03 Comment
05 Coal News
10 Industry View: The Common Ground Solution Toward Low-Carbon Energy Glenn Kellow, Peabody President and CEO.
Regional Report: China
12 The Only Way Is Up Sabrin Chowdhury, BMI Research, Singapore, explains how coal production growth in China will return to positive territory in 2017.
Communications & Tracking
17 Going Digital Brendon Cullen, RCT, Australia, talks to World Coal about the benefits of the digitalisation of communications at underground mine sites.
Longwall Mining Equipment
21 Saving FaceAllan Black and James Sudworth, Komatsu, UK, describe how advanced monitoring technologies are protecting coal workers at the face.
Surface Miners & Bucket Wheel Excavators
27 On The SurfaceWirtgen, Germany, detail the successful implementation of a surface miner at an existing coal mine operation in Australia.
Coal Storage Facilities
34 From Stockpile To Storage Dome Dr Christoph Seifert and Andreas Markiewicz, SCHADE Lagertechnic GmbH (Aumund Group), Germany, outline an environmentally friendly approach to storing and reclaiming coal.
39 Beat The Heat Derek Stuart, AMETEK Land, USA, illustrates early detection techniques of spontaneous combustion in coal storage and transportation and highlights their importance for plant safety.
Coal Sampling & Analysis
42 A Process Of EliminationAndrew Jonkers, Robin Sheehy and James Asbury, Realtime Instruments, provide part one of a two part series on the importance of sample loading in commercial through-belt PGNAA applications.
49 Testing! Testing!Robert Prior, Carbolite Gero, UK, describes how coke is created in a coal testing oven or pilot plant.
Mining Software
53 Unlocking Hidden ProfitsMarni Rabasso, Dassault Systèmes, details methods for maximising efficiency in the logistics supply chain.
Motion Metrics employs the latest image processing and deep
learning techniques to improve safety and productivity at over 80
mines and quarries worldwide. The company’s flagship product,
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CommentA s the leaves change colour and the days get shorter here in the UK,
Autumn (or Fall for our North American readers) is upon us. Looking back on September and the last of Summer, it has been quite the rollercoaster, as unexpected news filled headlines. Following shortly after Hurricane Irma, Hurricane Maria was the second Category 5 hurricane to hit land in this year’s Atlantic hurricane season, leaving a wake of destruction and devastation across the Northeastern Caribbean. German Chancellor Angela Merkel had a hollow victory in the German general election, securing a fourth term but losing seats and now prepares for difficult coalition talks. Despite Theresa May’s efforts to reassure the British public, Brexit negotiations appear to go round in circles; and a war of words over nuclear weapons between “rocket man” Kim Jong-un and “dotard” Donald Trump continues.
Among this uncertainty, recent actions and announcements are pointing to potentially major changes in the coal industry. Following the recent general election in Germany, coal’s position as the largest power producer in the country could be at risk if the Green party forms part of the next coalition government – which is more than likely – as this party is aiming for the phase out of coal in Germany. The UK is also taking further steps away from coal; this month, Theresa May reaffirmed plans to phase out coal in the UK by 2025. During her visit to Canada, the UK Prime Minister and Canadian Prime Minster Justin Trudeau made a joint announcement affirming the two nations will work together to support and encourage a global move away from coal reliance and work together to support clean technology.
But across the border in the US, a life line has been extended to US coal power. US Energy Secretary Rick Perry submitted a formal proposal to the Federal Energy Regulatory Commission (FERC) to consider a new grid resiliency rule that would change the way power markets price electricity. He called for more support and subsidies for coal and nuclear power plants that are readily available to generate power and contribute to power grid reliability, so they can avoid near-term closure (due to high competition from cheaper alternatives) and stay open in case they are needed as back-up power.
In addition to this, Perry also announced approximately US$36 million in federally-funded financial assistance to advance carbon capture technologies. Under the Department of Energy’s Office of Fossil Energy, the Design and Testing of Advanced Carbon Capture Technologies funding opportunity announcement will support cost-shared R&D projects that will continue the development of carbon capture technologies to either the engineering scale or to a commercial design.
So what does October have in store? As 2017 comes to an end, predictions for next year will emerge and overviews of the past year will be made. Keep up to date on www.worldcoal.com to read daily news on the global coal industry. In store in our October issue, innovative technology developments are highlighted. Automation and digitalisation in underground mines is making major steps forward for both safety and productivity, as articles from both RCT and Komatsu (pages 17 and 21) will attest. Above ground, discussions of surface miner applications, ways to maximise efficiency in the logistics supply chain, the importance of safe and environmentally friendly coal storage, as well as coal sampling and testing application reports, are discussed.
This month’s regional report focuses on China: Sabrin Chowdhury from BMI Research details the current trends in Chinese coal production and, while coal will remain the country’s main energy source over the coming years, it may continue to see tougher competition from renewables.
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October 2017 | World Coal | 5
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Coal NewsCoal-fired electricity
generation in China, the world’s largest coal consumer, is expected to remain flat through 2040, according to the US EIA’s International Energy Outlook 2017 (IEO2017). Other fuels, such as renewables, natural gas and nuclear power, are expected to make up increasing shares of China’s electricity generation.
Despite declines in coal’s generation share, IEO2017 projects that coal will
remain an important component of China’s energy mix, peaking at nearly 4400 billion kWh by 2030. However, as China continues to replace older, less efficient generators with more efficient units, China’s power sector coal consumption is expected to peak as soon as 2018, at 4800 million t.
As part of China’s 13th Five-Year Plan, a total of 150 GW of new coal capacity has been cancelled or postponed until at least 2020. Increasingly strict controls on total coal capacity and power plant emissions are expected to prompt the retirement of
up to 20 GW of older plants and spur technological upgrades to China’s remaining 1000 GW of coal power, according to the EIA.
Coal remains China’s largest source of electricity, accounting for more than 72% of the nation’s electricity generation in 2015. In the reference case of the EIA’s long-term international energy projections, China’s coal share of generation steadily decreases to nearly 50% by 2040, as generation shares from renewables and nuclear both increase. By 2040, fossil fuels (coal, natural gas and petroleum) are still expected to make up most of China’s electricity generation mix.
The EIA expects electricity generated from natural gas to grow by 6.5% between 2015 and 2040, with an addition of 70 GW of natural gas capacity. To support continued development, some energy-intensive urban areas, such as the Beijing-Tianjin-Hebei metropolitan area and the northeast region of China, will be encouraged to replace coal with natural gas.
Current renewable generation in China is dominated by hydroelectricity, which is the country’s second-largest source of generation after coal. Wind and solar currently account for relatively small amounts of generation, at 2.7% and 0.5%, respectively. However, the EIA expects substantial growth over the coming decades, consistent with the targets in China’s most recent Five-Year Plan, designed to uphold the country’s commitment to the Paris Agreement within the United Nations Framework Convention on Climate Change.
In China’s nationally determined contribution (NDC) that it filed as part of the Paris Agreement, the country expressed its intention to reduce carbon dioxide levels and increase the share of energy consumption from non-fossil sources to 20% by 2030. The EIA projects solar capacity to grow to 240 GW by 2040, or by more than 7% per year from 2015 to 2040. Similarly, the EIA expects nearly 280 GW of wind capacity to come online between 2015 and 2040, a growth rate of nearly 5% per year.
CHINA Coal-fired electricity generation to continue to decline
GE has successfully commenced commercial operations of
Unit One of Kusile’s coal-fired power plant. GE’s scope in Kusile Unit One is the engineering, procurement and construction (EPC) of six turbine islands, air cooled condensers and wet fluegas desulfurisation (WFGD) plant. The WFGD plant is an environmental control solution and the first to be built on a power plant in Africa.
GE Steam Power System’s efficient technologies are helping to make Kusile one of the cleanest coal-fired power plants in the continent. Ultra-
supercritical power generation technology continuing to raise the efficiency bar of coal power plants. It has achieved 47.5% efficiency in the world’s most efficient coal-fired power plant in Germany, well above the global average of 33%. Each percentage point improvement in efficiency is significant as each point reduces CO2 emissions from coal power plants by 2%.
“We are extremely proud of our expert global and local EPC teams who have worked professionally to ensure that we were able to support the commercial operation of Unit One” said
Nthabiseng Kubheka, GE’s Project Director for Kusile’s 6 x 800 MW Turbine Islands & WFGD Projects. “This great achievement definitely resonates with our goal to power everyone using clean technology.”
In addition to USC power generation technology, Kusile is the first power plant in the continent to deploy state-of-the-art WFGD technology. This air quality control system ensures the highest removal of sulfur and dust from the air, ensuring that Kusile will comply with the most stringent international standards and protect the communities around it.
SOUTH AFRICA GE technology reduces emissions at Kusile power plant
DIARY DATES
6 | World Coal | October 2017
BULKEX17 18 – 20 October 2017
Nottingham, UKwww.bulkex.co.uk
The World Coal Leaders Network™25 – 27 October 2017
Barcelona, Spainwww.coaltrans.com
6th Coaltrans Emerging Asian Coal Markets7 – 8 November 2017Ho Chi Minh, Vietnam
www.coaltrans.com
MetCoke World Summit 2017 7 – 9 November 2017
Rosemont, USAwww.metcokemarkets.com
Power Gen International5 – 7 DecemberLas Vegas, USA
www.power-gen.com/index.html
Coaltrans USA 1 – 2 February 2018
Miami, USAwww.coaltrans.com/usa/details.html
Coaltrans India12 – 14 February 2018
Goa, Indiawww.coaltrans.com/india/details.html
SME Annual Conference & Expo25 – 29 February 2018
Minneapolis, USAwww.smemeetings.com
Coal Processing Technology Conference Exhibition
23 – 25 April 2018Kentucky, USA
www.coalprepsociety.org/default.aspx
Coal News
Co
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C lean Coal Technologies Inc., an emerging clean-energy company
using patented technology to convert raw coal into a cleaner burning and more efficient fuel, has received a deposit from Wyoming New Energy (WNEC) to build a 2 million t facility using CCT’s Pristine M process. The project, announced 15 June at the Wyoming Mining Association annual conference, will be built by Kiewit Construction. Piper Jaffray (PJC) has been engaged by WNEC to arrange financing for the first commercial scale facility.
“This revenue validates our patented Pristine M technology. With the aid of our EPC contractors Kiewit, the final commercial design of the plant is expected later this year and will provide customers worldwide with the blueprint for a cleaner, more efficient and cost-effective fuel,”
stated Robin Eves, CEO and President of CCTI.
“For the past two months, Kiewit’s engineers have fine-tuned the test plant near Tulsa, OK, and will commence new hot runs early next week at the request of US government energy agencies and international clients,” added CCTI CFO/COO, Aiden Neary. “The testing is expected to last four weeks.”
“We are especially pleased to see the first commercial plant will be built in Wyoming, as local elected officials and business leaders have been exceptionally supportive of Wyoming New Energy and Clean Coal Technologies efforts. The backing of Piper Jaffrey, combined with the ongoing support from state and federal officials, will undoubtedly work to rejuvenate the coal industry in Wyoming,” said John Kuker, Spokesman for WNEC.
BMT Asia Pacific (BMT), a subsidiary of BMT Group, has been awarded
a contract by a consortium led by HSL constructor Sdn Bhd, and including Tecgates Engineering (M) Sdn Bhd and Gema Antara Sdn Bhd.
BMT will provide detailed engineering design and risk management consultancy services for a new coal unloading jetty and associated bulk handling system at the Tanjung Bin Energy (TBE) power plant in Johor, Malaysia.
Peter Ho, International Business Director from HSL Constructor, commented: “BMT has a strong presence in Malaysia and is well respected for its technical capabilities and expertise having worked on several other local projects and, as such, was a natural partner for this project. We are confident that the team will help us to
deliver a robust design that aligns with the needs of the end customer.”
The TBE power plant, also known as T4, is a super-critical coal-fired power plant developed by Tanjung Bin Energy Sdn Bhd, a part of Malakoff Corporation Bhd, providing the most efficient coal combustion technology currently on the market. Located adjacent to Malakoff’s existing 2100 MW coal-fired Tanjung Bin power plant, T4 commenced operations in March 2016.
BMT will work closely with the consortium to deliver detailed engineering design and risk management solutions. BMT’s team of experts will also provide construction support and, upon completion, will liaise with the local authorities to secure the Certificate of Completion and Compliance (CCC), which will, in turn, allow the owner to operate the facility.
USA CCT advancing with Wyoming coal enhancement project
MALAYSIA BMT contracted for new handling system at coal plant
Coal News
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8 | World Coal | October 2017
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Coal NewsA round-up of news from coal
development projects around the world.
Tanzania
Edenville EnergyThe construction of the wash plant at Edenville Energy’s Rukwa coal project site has now been completed.
The plant is currently undergoing final commissioning and testing, with the goal to be producing washed coal for sale early October.
In addition to the completion of the wash plant, the weighbridge has been installed and support services, such as the laboratory, offices and stores, are in final construction.
Following commissioning, the wash plant will process material to fulfil requests for coal that have already been made. Several major industrial users have also requested test shipments and the company will be dispatching these over the coming weeks.
Canada
Atrum Coal Atrum Coal, along with its joint venture partner Japan Oil, Gas and Metals National Corp. (JOGMEC), has completed initial field work at the company’s Panorama North anthracite project in British Columbia.
Recently appointed Managing Director and CEO Max Wang commented: “Following our initial exploration in 2016, we have completed our second drilling programme at Panorama North. We are happy to announce that we have intersected multiple thick, near surface anthracite coal seams. We have now completed the field work, with coal samples being sent for
testing. Our exploration team led by Senior Geologist, Daniel Campbell will review the results and complete a structural interpretation of the Panorama North deposit. Once again, we are thankful to our Aboriginal partners for their support in the field work.”
Allegiance CoalAllegiance has presented the results of the stage 1 pre-feasibility study (stage 1 PFS) along with its internal review of the staged production PFS for the Telkwa metallurgical coal project in northwest British Columbia. The stage 1 PFS assesses the viability of the Telkwa project assuming Allegiance is only ever permitted to mine at the rate of 250 000 saleable tpy. Like the staged production PFS, the stage 1 PFS was undertaken by SRK Consulting Inc. assisted by other mining and resources specialists.
According to a company ASX announcement, the stage 1 pre-feasibility study reinforces the viability of the Telkwa metallurgical coal project as a stand-alone small mine operation positioned in the lowest five percentile of the global seaborne metallurgical coal cost curve.
Pacific American Coal Pacific American Coal Ltd has experienced disruption to its exploration activity at its Elko metallurgical coal project.
The company has been working closely with the Project Manager of the Elko project to complete a number of pre-drilling tasks in preparation for the exploration programme, as well as the required environmental work needed for permitting. However, due to the unprecedented wildfire season
being experienced in British Columbia, which has included an extended state of emergency and industry shutdown across the Province, the company has had sparse access to the property. This has hampered the team’s ability to complete the necessary tasks required to obtain drilling permits.
Whilst the delay in finalising the required studies has contributed to the rescheduling of the planned drilling programme, the company recently renewed its exploration licence covering the Elko and Hazell projects for a further twelve months. As soon as conditions permit, the company intends returning its personnel to the ground to complete the required permitting field work.
Australia
TerraComTerraCom has completed further upgrade work to the Blair Athol mine JORC Reserve and Resources. Independent experts Xenith Consulting Pty Ltd (Xenith) and TerraCom have conducted further work at the mine and have been able to upgrade the total Blair Athol mine JORC reserves to 15.6 million t and increase the JORC measured resource to 21.9 million t. The coal reserves and resources have been estimated in accordance with the standards outlined in the JORC code (JORC, 2012) and the Coal Guidelines 2014. Further work since TerraCom completed the acquisition of the Blair Athol mine, which included the detailed assessment of all boreholes using historical data on site has enabled Xenith to extend the reserves by 2.1 million t adding one extra year to mine life, which now totals eight years based on 2 million tpy.
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10 | World Coal | October 2017
Ind
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Industry View
Few industries have the satisfaction of providing an
essential product that is so vital to so many. Coal provides reliable, affordable baseload generation, offering enormous benefits that other fuels struggle to achieve. The coal industry provides needed energy for billions globally, powering growth and fuelling some of the world’s best economies at some of the lowest costs.
Central to the growing global dialogue around energy and the environment is the need to maintain this reliable and affordable supply of power. Because coal will be with us well into the future, the question should not be whether we use coal, but how we use it.
Any discussion to accelerate a transition to low-carbon energy systems must focus on broad use of high-efficiency, low-emissions (HELE) coal-fired generation technologies and policies, along with investments to commercialise next-generation carbon capture technologies over time.
A quick look at world energy shows coal is a vital component of the energy mix. Over 1200 new coal generating units have come online since 2010 with 43 nations adding over 520 GW of coal power. Coal pricing has remained steady while the cost of other energy sources has fluctuated over time, and most of these new plants are being built with the best technology available.
We have already witnessed the benefits of deploying clean coal technologies. HELE coal generation, for example, has resulted in
significant environmental improvements, including a 90 – 99% reduction in particulates and other emissions when compared to standard installations.
These plants also operate up to 25% more efficiently and reduce carbon dioxide emissions by about 25%. Said another way, the environmental benefit of a single large HELE coal plant is equivalent to removing 1 million vehicles from the road annually compared to older plants.
Longer term, carbon capture must be brought to commercial readiness by advancing a substantial increase in carbon capture projects for energy and industrial use. While it is clear that achieving a low-carbon future comes at a very high price, that price soars higher if carbon capture is not deployed.
Government studies have shown that the costs of achieving the goal of the Paris Agreement could more than double without the use of carbon capture, and researchers have found that excluding carbon capture as a solution increases the median estimated mitigation costs from about 2% of global GDP to 5%.
A recent technology success story can be seen at the Petra Nova carbon capture facility near Houston, which I visited earlier this year. It is the world’s largest project of its kind, capturing carbon for enhanced oil recovery. Expectations are the project will increase oil production from 500 to as many as 15 000 barrels of oil a day at a nearby oilfield. If we expect to achieve our environmental goals, the right policy prescription, coupled
with many more projects like Petra Nova, is needed.
I had the privilege of serving as Chair on a National Coal Council study in 2015 that called for policies that would enable carbon capture to achieve policy parity with other low-carbon sources of energy. Bipartisan efforts are also needed to advance progress. In the US, we have support from both sides of the aisle to promote use of carbon capture through tax credits for sequestering CO2 for instance, along with government grants for projects like Petra Nova. It’s a start – with much more needed.
Expanding on the use of advanced coal technologies is key to meeting today’s growing energy demands and accelerating the path to a low-carbon future. Peabody’s clean coal annual awards programme, now running in its fourth year, shines a light on the tremendous environmental progress we are achieving globally by recognising the cleanest coal plants in the world.
Technology will lead to a future of energy security, economic progress and environmental solutions. Regardless of where in the world we call home, our political leanings or societal backgrounds, we can all agree that it is the common ground solution toward a low-carbon future.
About the author Glenn Kellow is Peabody’s President and CEO. Kellow is a director and executive committee member of the World Coal Association, the US National Mining Association and the International Energy Agency Coal Industry Advisory Board.
TECHNOLOGY: THE COMMON GROUND SOLUTION TOWARD LOW-CARBON ENERGY Glenn Kellow, Peabody President and CEO
12 | World Coal | October 2017
THE ONLY WAY IS UPSabrin Chowdhury, BMI Research, Singapore, explains how coal production growth in China will return to positive territory in 2017.
October 2017 | World Coal | 13
P roduction restarts and consolidation efforts aimed purely at idled mines will ensure coal output from China grows over the coming years compared to the decline in 2016. Over the long
term, production growth will stagnate on the back of environmental concerns and historically low prices.
Latest developmentsBMI Research revised its thermal coal price forecast for 2017 to US$75/t, compared to US$70/t, on the back of strong Chinese demand following weather disruptions at hydropower plants. Prices will ease towards the end of 2017 and beyond as Chinese hydropower capacity is restored due to better weather and the global market is better supplied by increases in output from major producers.
China's coal production will register an annual average growth of 1% during 2017 – 2026 due to the shift away from fossil fuels. This is still a significant increase compared to the -0.7% year-on-year decline during 2012 – 2016 due to government consolidation.
After strong consolidation in the coal mining sector in 1H16, the government urged miners to restart production and eased restrictions after thermal and metallurgical coal spot prices increased dramatically.
In September 2016, Chinese state-owned coal miners agreed to increase coal output in an attempt to mitigate a sharp rise in prices that hurt the Chinese steel industry.
In January 2017, the government cancelled approximately 103 coal-fired power plant projects that were planned or under construction, eliminating 120 GW of future coal-fired capacity. BMI expect coal reliance for power generation to peak by 2020 due to China's commitment at the UN Paris Climate Conference in December 2015 to cap its coal intake and increase the use of renewables, such as wind and solar, in its energy mix to 15% by 2020. Nevertheless, China will remain heavily reliant on coal for power generation over the coming years.
Despite the government announcing in January 2017 that the overcapacity reduction drive in the polluting coal sector will be stronger in 2017, Xu Shaoshi, Director of the National Development and Reform Commission (NDRC), said that the government will ensure stable supplies of coal even as cuts take place. This is because idled, old and inefficient mines will be the first targets of capacity reduction, rather than active efficient mines. Reductions in
capacity will not have any effects on production in the coming months.
Structural trends
2017 price upgrade prompted by unfavourable weather conditionsBMI expect prices to remain elevated over the next three months as Chinese demand will be sustained by weather disrupting hydropower generation across the country. Prices will start easing thereafter as better weather emerges.
The seaborne, metallurgical and thermal coal markets are currently tight due to wet weather in Indonesia and South Africa, and mining outages as well as strikes in Australia constraining supply. Despite Chinese domestic raw coal output increasing by 5.6% year-on-year in 1H17, demand has outstripped supply, especially as torrential rain in China forced hydropower plants to cut output. For instance, the world's largest hydropower plant, the 20 000 MW Three Gorges dam in China, reduced capacity by 6000 MW. Simultaneously, China's northern provinces are experiencing unusually dry and hot weather, pushing up power demand. High-frequency indicators, including time-spreads on Newcastle coal futures, support this view by indicating that the global market is tighter now than in 1Q17. For instance, the spread between first and six-month Newcastle coal contracts has increased to US$6.25/t as of 26 July compared to US$4.35/t in March 2017. This is close to an October 2016 high of US$7.65/t. Towards the end of 2017, the
seaborne market is expected to loosen further as poor weather clears and for prices to head lower again.
BMI maintains its 2018 – 2021 forecasts as it continues to hold the view that prices will weaken due to better supplies and a global demand shift away from coal once weather issues settle. While the Chinese government has started curbing fiscal support to heavy industry, long-term infrastructure and construction projects initiated in 2016 and 1H17 have ensured that power-intensive activities, such as production of industrial materials, construction and transport remain strong. Nevertheless, a restart of rebalancing the Chinese economy from a model where heavy industry and construction drive growth to one more dependent on the service sector in 2018 will cause demand for power and hence prices of coal ease further. Prices will not sustainably return to the 2016 lows of around US$50/t and the research company expect stabilisation in a range of US$60 – 75/t.
China imports to weakenA further weakening of the market will be caused by an end to rampant Chinese coal import growth, which was the main driver of the strong price growth of the last 18 months. In 1H17, Chinese thermal coal imports rose by 22% year-on-year, following 31.7% growth during 2H16. This compares to a contraction of -13.3% in 2014 and -33.1% in 2015. China's recent regulations on banning coal imports at 150 smaller mines starting 1 July will have limited impact on total
imports and prices, as the measures only affect approximately 15% of the dirty coal imported from Indonesia and 3% of total coal imported into China.
Chinese coal imports will weaken in 2018 due to a combination of stronger domestic supply, as government limits on output are relaxed, alongside weaker demand growth, as the positive impact on coal demand of economic stimulus measures wane.
On the supply side, limits on coal production have been rolled back. In fact, China's raw coal output increased by 5.6% year-on-year in 1H17. In September 2016, China's state planner, the National Development and Reform Commission (NDRC), requested Chinese state-owned coal miners increase thermal coal output. This partial backtrack by the NRDC is due to the spike in metallurgical and thermal coal prices that hurt margins at China's steel mills and power plants after government consolidation reduced raw coal output by 290 million t in 2016. Chinese Premier Li announced a much smaller annual coal capacity reduction target of 150 million t in March 2017 compared to 2016. BMI believe actual 'capacity cuts' will come from idled mines.
On the demand side, BMI believe the use of coal in Chinese power generation has peaked, and the recent pickup in demand due to poor weather affecting hydropower capacity will not be sustained in the longer term. Furthermore, economic stimulus measures have started to wane and BMI expect the recentralisation of power in President Xi at the 19th National Party Congress in November 2017 to be followed by renewed economic reforms and a resumption of the structural decline in economic growth. The dampening effect of this slowdown on coal consumption will be exacerbated by an ongoing shift away from power-intensive manufacturing and construction, and towards the less energy-intensive service sector.
Table 2. China coal production forecasts (2017 – 2026)
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
3687.6 coal mine production in million tonnes
3511.9 3547 3582.4 3600.4 3618.4 3651 3651 3665.6 3676.6 3687.6
Coal mine production growth (% year-on-year)
5.0 1.0 1.0 0.5 0.5 0.5 0.4 0.4 0.3 0.3
Table 1. BMI thermal coal price forecasts
2017 2018 2019 2020 2021
US$/tonne, average 75 67 65 65 67
Bloomberg consensus 75.5 67.3 65 65.4 67
14 | World Coal | October 2017
Environmental regulations to hurt miners in the long termBMI expect the priority to heighten environmental protection and conservation of coal resources in China's 13th Five-Year Plan to weigh on long-term coal production in China. A 2015 study estimated that air pollution mostly from the widespread burning of coal contributed up to 1.6 million deaths each year in China. In January 2015, the Chinese 'dirty coal' ban came into effect, prohibiting the domestic sale of coal with ash and sulfur content exceeding 40% and 3%, respectively. Other limitations include coal with chemical content, such as mercury and arsenic. This ruling has paved the exit of more domestic mines, including those in southwest China with sulfur content as high as 5%. In addition, a 600 km restriction on the transport of lignite with a heating value of less than 3940 00 cal/kg, ash content of more than 20% or sulfur of more than 1% from the production site will cause major logistical issues for mines affected by these regulations and further stimulate consolidation.
China's commitment to cap its coal intake and increase the use of renewables, such as wind and solar, in its energy mix to 15% by 2020 at the UN Paris Climate Conference in December 2015 will ensure further decline in coal production growth.
Coal to remain kingCoal-fired power generation will continue to be China's dominant energy producer over the coming years. China accounted for an estimated 44.1% of global coal-fired power generation in 2015 and will thus remain the key swing country in determining global coal prices. However, BMI forecast coal's share in the country's energy mix to fall from 68.2% of total electricity generation in 2016 to 54.4% in 2025. At the same time, the country's share of renewables in the energy mix will increase over the years. This increase in use of renewables coupled with reduced power demand in China has led to dramatic falls in the operating hours of thermal power plants where coal is used as the main fuel. This
scenario is unlikely to change over the coming years, given the bullish outlook for non-hydro renewables generation and the ongoing slowdown in power consumption in China. In January 2017, the government cancelled approximately 103 coal-fired power plant projects that were planned or under construction, eliminating 120 GW of future coal-fired capacity. At present China is the world's largest wind and solar powerhouse, although accounting only for 5.4% of total electricity generation in the country.
China has limited alternatives to burning coal as there are limits to its domestic gas output growth and LNG imports are considerably more expensive. Beijing recently implemented gas pricing reforms, with the NDRC in November 2015 stating that gas prices will be cut by an average of 28% across the whole country to boost gas consumption. The growth in demand for gas will uphold China's pledge to increase the share of non-fossil fuels in its energy mix by 2020.
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