China to drive 60% of global coal demand growth by 2018

16 December 2013 12:39 Source:ICIS

Coal demand growth will slow slightly over the next five years as Chinese policies aimed at reducing its dependency on coal kick in, the International Energy Agency (IEA) said in its medium-term coal market outlook on Monday.

Over the next five years coal demand will increase an average 2.3% per year, compared to last year’s forecast of 2.6% annual growth up to 2017 ( see CSD 18 December 2012 ). The report said coal demand grew 3.4% per year between 2007 and 2012.

A 2.3% annual increase would push coal demand to almost 9bn tonnes in 2013, from 7.7bn tonnes in 2012.

However, China will account for 60% of new demand over the next five years, with its production and consumption equalling that of the rest of the world combined. Last year China imported 301m tonnes of coal, with another 600m tonnes of Chinese domestic coal shipped from the north of the country to south China ports. “This makes arbitrage between domestic and imported coal on China’s southern coast pivotal to coal market developments,” IEA said in a statement accompanying the medium-term coal market report.

Looking further ahead, a number of coal conversion projects to produce liquid fuels and synthetic natural gas could significantly reduce its demand for other fossil fuels. However, these projects could also provide an additional driver for coal demand in China.

“During the next five years, coal gasification will contribute more to China’s gas supply than shale gas,” said IEA energy markets and security director Keisuke Sadamori.

Indian demand comes second behind Chinese, but lower economic growth and project development difficulties have lowered India’s average annual growth rate to 4.9% in the 2013 outlook, from 6.3% projected in last year’s report.

Meawhile, in the OECD countries, coal demand will remain flat up to 2018. An increase in Japan and Korea will be offset by a fall elsewhere. “The European coal fever prompted by the price differential between coal and gas, as well as low CO2 prices, will prove temporary, and European demand will fall more than 6% through 2018,” IEA said. Manca Vitorino

By Manca Vitorino