Since the beginning of the Industrial Revolution, coal has been the main global energy source for over a hundred years. Even after oil replaced coal as the world’s primary energy source, coal remains one of the most important basic energy sources in the world. In recent years, with the climate change caused by greenhouse gas emissions becoming a global issue, the industrialization process of emerging economies has begun and accelerated, and the pressure on global resource supply and environmental carrying capacity has become increasingly prominent. While energy demand is growing overall, the world is beginning to transition to a low-carbon future, and the energy structure is changing. The growth rate of efficient and clean low-carbon fuels will exceed that of carbon intensive fuels. In the context of energy transition, there is a significant difference in the situation of the coal industry between developed and emerging economies. The government has made policy adjustments to suppress or boost the coal industry, and coal enterprises are responding to various pressures of competition and survival. The future coal industry is contributing to global energy consumption growth while waiting for more changes.
In today’s world, Asia Pacific, Europe, and North America are the main regions for coal production and consumption. These regions are spread across the world’s major developed and emerging economies. There are significant differences between the two in terms of coal consumption characteristics. Developed economies have entered the post industrial era, and their dependence on high energy consuming heavy industry for economic development is gradually decreasing. In addition, power production is shifting towards green and clean directions. Therefore, the demand intensity for coal in developed economies is showing a downward trend. In terms of coal related policies, the main tone is to reduce project funding, set emission restrictions, and phase out coal use. At the same time, emerging economies are in a rapidly developing stage of heavy industrialization, and their high energy consuming economic structure cannot do without the support of cheap energy. Therefore, the demand for various energy sources, including coal, remains strong. In terms of coal related policies, the main tone is to increase coal production, develop coal-fired power plants, and boost the coal industry.
Corresponding to the situation and relevant policies of the coal industry in various economies is the current situation of their coal enterprises. In developed economies that are gradually transitioning away from and phasing out coal, coal companies are facing a survival crisis, bankruptcy, or difficult survival. Large conglomerates and giants are also accelerating the divestment of coal businesses or assets. In emerging economies with strong coal demand, coal companies are implementing production and investment expansion plans.
1. Bankruptcy or difficult survival of European and American coal companies
In 2015, coal prices fell for the fifth consecutive year, and global demand for coal plummeted by an unprecedented 6%, forcing some large coal mining companies around the world to go bankrupt or be on the brink of bankruptcy, struggling to survive.
Taking the United States as an example, since May 2015, after PatriotCoal, Walter Energy, AlphaNatural, and ArchCoal filed for bankruptcy, Peabody Energy, the world’s largest private coal producer and American coal giant, also joined the bankruptcy ranks in April this year, becoming the latest case in the wave of bankruptcies of large coal production companies in the United States. In the past few years, dozens of coal companies in the United States have filed for bankruptcy. The internal and external factors that affect the survival of American coal companies are mainly as follows: firstly, the booming shale gas boom in the United States has greatly lowered natural gas prices, and more and more power plants are using natural gas for electricity generation; Secondly, since the outbreak of the supply-demand imbalance in the international coal market in 2012, coal prices have been declining day by day; Thirdly, stricter government regulation has restricted the use of coal.
The largest private coal enterprise in Eastern Europe, Czech producer NewWorld Resources, suffered a net loss of approximately 233.6 million euros in 2015, with a net debt of approximately 298 million euros as of the end of last year and a cash flow of 86 million euros. Its coal production was only 8 million tons, a year-on-year decrease of 7.5% compared to 2014. In addition, the company’s stock price has fallen by 99% since its listing in 2008. Faced with plummeting performance, New World Resources also had to confront the crisis of bankruptcy. If the company does not receive financial support, it will close its loss making coal mines and restructure its disastrous business, which has been negatively affected by the decline in coal prices and environmental pressures. Currently, creditors of New World Resources have agreed to extend the debt default period to give the company more time to reach a business restructuring agreement with the government.
1. The output of India’s state-owned coal company will reach a new high
The Indian state-owned coal company is the world’s largest coal producer, currently accounting for 80% of India’s total domestic coal production. The government requires the company to double its coal production to 1 billion tons by 2020. Minister of Coal, Anil? Swarup stated that in the 2010-2014 fiscal year, the increase in coal production by India’s state-owned coal companies was almost less than 31 million tons. However, in the 2015 fiscal year, coal production increased by about 32 million tons, a year-on-year increase of 9.8%, which is unbelievable. This fiscal year, the coal production of India’s state-owned coal companies is expected to reach a new high, with an estimated output of 540 to 550 million tons. The Indian parliament has announced that the state-owned coal company will invest 570 billion rupees (54.549 billion yuan) over the next five years, increasing its coal production to 908.1 million tons. Meanwhile, the increase in coal production has led to a decrease in imports, resulting in cost savings of INR 170 billion for users in the first nine months of the previous fiscal year alone. The shortage of coal in India will become history, and by 2017, India will no longer need to import coal except for coastal power plants.
2. Indonesian companies increase coal production and sales, expand overseas markets
Although coal prices remain low, Indonesia’s state-owned coal company Bukit Asam has managed to increase production. The company has set a target to reach 25.75 million tons by the end of 2016, or a 34% increase from the actual production of 19.24 million tons in 2015. In addition to increasing production targets, BukitAsam expects a larger sales volume this year, reaching 29.17 million tons, which will be 52.16% higher than last year’s actual sales of 19.17 million tons. Among them, 15.17 million tons of coal will be supplied to the domestic market, and the remaining 14 million tons will be supplied to the export market. To achieve production targets, BukitAsam company will improve production efficiency and save production costs. In addition to coal production issues, BukitAsam is in the process of purchasing a 24% stake in Ignite Energy Resources in Australia and hopes to complete the purchase within this year. In addition, Salim Group in Indonesia is actively expanding its market overseas. In January 2016, the group acquired one of Rio Tinto’s largest coal mines in Australia, further extending its reach to Australia.
In the short term, coal remains the main player in the global electricity market, contributing to the growth of global energy demand. In the long term, it will gradually be replaced by other fuel sources such as natural gas. At the same time, the survival and development of the coal industry require the development and popularization of clean coal technology.
1. From a global perspective, coal remains the main player in the electricity market
According to industry organization World Coal Association, coal provides about 30% of primary energy and over 40% of electricity worldwide. Although the position of coal in the energy structure of Europe is gradually declining, coal has not completely exited the European stage, especially in power generation. Coal is still an important fuel for power generation in many European countries, and it may still have great potential in future hybrid power. According to reports, about a quarter of Europe’s electricity still comes from coal-fired power generation. Germany is the largest economy in Europe and the largest producer of wind and solar energy in the region, but 45% of the country’s electricity still comes from coal-fired power plants. In the UK, coal accounts for more than 20% of the energy consumption in the power industry. Although renewable energy has begun to replace coal, it has not yet fully achieved carbonization free. Even though the proportion of coal-fired power generation in the United States has decreased more than in Europe, coal production in North America has only decreased by 4.6%.
Benjamin, President of the World Coal Association? Sporton stated that globally, coal-fired power plants are still on the rise until 2040. Specifically for countries, China may gradually stabilize, India is growing, many Asian countries will continue to grow, and European countries may experience fluctuations and stable development. Due to population growth and urbanization demand, the demand for coal-fired power plants continues to increase. Even in the future, with the increasing proportion of renewable energy use in Asian countries, coal remains a high-quality and alternative energy choice in the face of energy shortages. Despite the slowdown in coal demand in China, the demand for coal in Southeast Asian countries continues to grow at a rate of 4.8% per year, and this trend will continue until 2035. Many emerging economies, such as Southeast Asia and even the entire Asia, require affordable, reliable, and available energy to support their economic development, and coal is the best option.
The International Energy Agency also made a similar judgment in 2015: in the next 25 years, the demand for coal in Southeast Asia will grow the fastest among all energy sources, replacing the position of oil in the region’s energy mix. Contrary to the trend in other parts of the world, in the next 25 years, the proportion of coal in power generation in this fastest-growing region is expected to increase from less than one-third currently to around 50%. Therefore, globally, coal remains the main player in the electricity market.
2. Natural gas will replace coal as the second largest fuel source in the future
The power generation industry is the main competitive sector for various fuels. As renewable energy and natural gas power generation gradually replace traditional thermal power generation, the power generation industry will play an important role in the evolution of energy structure. The latest World Energy Outlook (2016 edition) released by BP indicates that global energy demand is expected to grow by 34% between 2014 and 2035, with an average annual growth rate of 1.4%. As the world begins to transition towards a low-carbon future, the energy structure will undergo significant changes in the overall growth of demand, and the growth rate of low-carbon fuels will exceed that of carbon intensive fuels. Despite the rapid growth of other forms of energy, the Outlook predicts that fossil fuels will remain the main form of energy from now until 2035, meeting 60% of the expected increase in energy demand and accounting for nearly 80% of the world’s total energy supply by 2035. Natural gas will become the fastest-growing fossil fuel, with an annual growth rate of 1.8%. Oil will steadily grow at a rate of 0.9% per year, but its share in the energy structure will continue to decline. The growth of coal is expected to significantly slow down, and its share in the energy structure will slide to a historical low by 2035, accounting for less than 25%, the lowest share since the Industrial Revolution. And natural gas will replace coal as the second largest fuel source.
3. Clean and efficient utilization of coal will receive higher attention
Under the pressure of climate change, for countries that still rely on coal as a cheap energy source for their own development, the only way to meet demand while minimizing environmental damage is to find effective technologies to make coal clean and green, rather than replacing it. Although the debate over clean coal technology is still ongoing, some countries and regions have begun to take action and actively establish demonstration projects of this kind. The EU India Science and Technology Innovation Cooperation Fund provides 3.4 million euros in funding, with a total R&D investment of 5.3 million euros. EU member states France and the Netherlands, together with India, participate in the research and development team. Four coal-fired enterprises form a joint R&D team with the scientific and technological community. Based on the key priority cooperation areas determined by the intergovernmental joint committee of both sides, the team has been committed to the joint development and application of clean coal technology since November 2011.