December 19, 2017 Read More →

Commentary: ‘Bearish Risks Dominate’ Across Global Coal Industry

Reuters:

Moribund global demand growth and volatile pricing are what coal producers face in the next five years, with not even some bright spots in Asia able to outweigh a bleak outlook for Europe and the United States, and lower consumption in top user China.

That’s the central message of the International Energy Agency’s Coal 2017 report, which outlines a future in which coal remains a significant source of global energy, but one that is decreasing in importance.

Global coal demand will grow by only a compound 0.5 percent a year over the 2018-22 period to 5,534 million tonnes of coal equivalent (mtce), up just 177 mtce from 2016’s consumption, the IEA said.

Top consumer China is expected to drop 0.1 percent a year to 2,787 mtce by 2022, while demand in the United States will fall 0.9 percent per annum over the five-year forecast period, and that in developed countries in Europe by 1.6 percent per annum.

India remains the best hope for coal producers, with thermal coal demand expected to climb 3.3 percent a year to 605 mtce by 2022.

Positive contributions to growth are also expected from newer consumers such as Pakistan and countries in Southeast Asia.

But overall, it’s pretty grim reading for coal miners, traders and their political backers, such as U.S. President Donald Trump and the ruling Liberal Party in top exporter Australia.

The IEA report also continues a trend of increasingly bearish forecasts from the agency, as it has steadily reduced its expectations for coal’s share of global energy.

The IEA’s 2012 coal report forecast that global coal consumption would rise to 6,169 mtce in 2017, but the reality has turned out somewhat differently.

The IEA didn’t provide a forecast for 2017 in its latest report, but said demand in 2016 was 5,357 mtce and estimated 2018 at 5,445 mtce.

In other words, the IEA’s forecasts from five years ago were too optimistic for the industry, even if they seemed reasonable and quite cautious at the time they were published.

More: Coal’s bleak future is stagnant demand, volatile trading: Russell

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