The coal-d shoulder?

Good fortune and the number 13 don’t usually go hand in hand, but when it comes to coal, 2013 actually seems to have been the commodity’s lucky year. And it has been downhill from there. The recently-released International Energy Agency’s (IEA) Coal information Overview for 2019 states that in 2018, production levels remained stubbornly lower than 2013’s peak production year.

According to the document, last year, global production of coal went up by 250 metric tons, an increase of 3.3%. Yet, although this was around equal to 2017’s growth rate — and regardless of two years’ worth of substantial growth, production levels were still 162 metric tons less than 2013’s peak production. According to the IEA, the growth was greatly impacted by a 4.5% rise in Chinese coal production. Chinese consumption, however, marked an increase of just 1% last year.

“Coal is still prominent in some non-Organisation for Economic Co-operation and Development (OECD) countries, however global consumption likely peaked in 2013, as the OECD and China shift to lower-carbon energy sources,” oil and gas corporation ExxonMobil said in its 2019 Outlook for Energy: A perspective to 2040 report.

Norwegian multinational energy firm Equinor has a similar view to ExxonMobil. According to the company, writing in its Energy Perspectives 2019 report, demand for coal rose for the second consecutive year, although it is still under the 2013 peak.

“Up until 2013, coal was the fastest-growing fossil fuel,” it said. “Most projections showed that global coal demand would continue to grow for the next 15 to 20 years. Now, many projections show that Chinese and global coal demand may have peaked and will never move above the levels seen in 2013.”

A sea change

With increased societal focus on making the planet greener, the tide is turning against coal, particularly when it comes to electricity-generation – the main destination for the commodity, along with the production of commercial heat. New Scientist reported in July that generation of electricity from coal power stations across Europe dropped by almost a fifth over the first six months of 2019, the steepest decline ever recorded. Indeed, the IEA puts a drop in electricity generated by coal-fired plants in OECD nations down to work towards greening power. According to the 2019 Coal information Overview, the fall by 4.65%, to 2,862.7 terawatt hours, is solely down to the efforts towards the decarbonisation of the power industry.

Although the global share of heat and power created from coal has stayed around 40% across the past four decades, last year, the amount of electricity and heat generated from primary coal as a fuel hit a new low of 25.2% from 26.7% the year before. Furthermore, assuming there weren’t any efficiency alterations last year relative to the year before, coal inputs in OECD countries for electricity and heat-creation marked a possible decrease of 4.6%. The amount of heat created by coal-fired plants in OECD nations went down to 671.4 petajoules from 695.6 petajoules in 2017.

ExxonMobil’s 2019 Outlook for Energy: A perspective to 2040 underlines the notion of an industry in decline. According to the report, global demand for coal in 2017 stood at 147 quadrillion British thermal units, and this was up against the figures for 2010 and 2000. However, demand for the commodity is forecast to be 142 quadrillion British thermal units in 2020, with the outlook dropping down every five years thereafter until it stands at 133 quadrillion British thermal units in 2040.

Stats speak differently

What does this mean for trade in the commodity in the short-term? Given the figures noted above, it would be understandable if interested parties took a dim view. However, it turns out that globally last year, export trade of every coal type went up by 4.2% from 1,363.4 metric tons in 2017. While steam coal exports rose by 42.2 metric tons, or 4.1%, coking coal exports grew by 12.2 metric tons, or 3.8%. The IEA explains that world trade has been growing quicker than world consumption relatively consistently.

“Indonesia and Australia remained the world’s largest coal exporters in 2018, with 30.9% and 26.9% of exports on a tonnage basis,” the body says in the Coal information Overview. “After reclaiming the top exporter’s spot in 2017, Indonesia further increased the gap in 2018, exporting 57 metric tons more than Australia. Australian coal exports increased moderately by 0.8%.”

As for imports, these marked a hike of 3.6% in 2018 in comparison with the year before — to 1,424 metric tons.

“The main contributors to this rise were China, with imports increasing by 3.9% in 2017, to 295.4 metric tons, and India, with a 14.7% rise in imports to reach 240.2 metric tons,” said the IEA.

“More of global electricity demand will be met from renewables, relying relatively less on coal for meeting growing demand,” said Equinor in its Energy Perspectives 2019 report, looking ahead. “However, it is not yet clear whether the growth of renewables is causing a decline in the use of fossil fuels or just representing a new addition. So far, most signs point to the latter one. Despite record growth in solar and wind capacity installations, the world is still increasing its use of fossil fuels.”

As for production, the IEA claims that a trend of declining coal production — in 2014, 2015 and 2016 — was reversed in 2017, with a further rise in production last year driven by hikes in steam and coking coal production.

“China remained the world’s leading coal producer, as it has been since 1985, with 3,550.1 metric tons of total coal produced, 152.9 metric tons (4.5%) higher than in 2017,” it noted.

But with production netherless failing to surpass 2013’s record, it seems that society’s green agenda is making its presence felt — and given the media attention devoted to the issue, it doesn’t look like it will be going away.

The Baltic Exchange will hold its next Shipping Economics & Investment course on 13 and 14 January 2020 in London. More information can be found here.