China could be facing peak coal demand for the first time ever
as a cooling economy and structural changes in its industry hit consumption, paving the way for India to emerge as the main driver of global coal use by 2020, the International Energy Agency said.
China is the world's top coal consumer but its uptake of the dirty fossil fuel has waned with the country moving more towards less energy-intensive sectors. State efforts to cap consumption in a bid to clear up the choking smog that smothers the country's major cities have also hit demand."The golden age of coal in China seems to be over,"
the International Energy Agency (IEA) said on Friday in its Medium-Term Market Report to 2020, adding that a "peak coal" demand scenario was now probable due to stagnating housing and infrastructure development.
Lower-than-expected power demand as the use of electricity drops in heavy industry will also contribute to the decline in coal consumption, the Paris-based group added.
The IEA said China's coal demand would fall to 2,640 million tonnes of coal-equivalent (Mtce) by 2020 from 2,843 Mtce in 2014 based on the group's peak-demand scenario.
As a result, global demand will dip to 5,509 Mtce in 2020 from 5,540 Mtce in 2014, the IEA said. Under a slightly less bearish outlook, however, demand could still see a 0.8 percent annual growth to 5,814 Mtce in 2020, it added.
Slowing demand, environmental policies and more alternative fuels will keep coal prices low, the IEA added. Thermal coal prices have already fallen to or near decade troughs.
"The continuous pressure from shale gas in the United States, stronger climate policies, and especially, the overcapacity and slowdown in China all contribute to the oversupply. This glut will be even more acute if a peak coal demand in China becomes real," the IEA said.
The U.S. Institute for Energy Economics and Financial Analysis (IEEFA), which also published a coal outlook this week, painted a gloomy picture for coal demand as well.
"The global traded coal industry is in dire straits," said Tim Buckley, IEEFA's director of Energy Finance Studies in Australasia.
"(The) outlook for the global traded coal industry remains one of declining demand, excess supply ... relentless cost down initiatives, excessive financial leverage, asset write-downs and unprecedented stranded assets (and) shareholder wealth destruction," IEEFA said.
India is expected to pick up some of the slack in Chinese demand with its coal use seen up 149 Mtce by 2020, accounting for half of the rise in world coal demand over the period, according to the IEA.
The IEA did not include findings of the global climate change talks which took place in Paris earlier in December as the group said the report was being printed during the negotiations.http://www.reuters.com/article/global-coal-iea-outlook-idUSKBN0U104120151218