For decades, coal was a linchpin of Australia’s export base. Prior to the China-led commodity boom, coal exports – both thermal and coking – accounted for between 10% and 15% of Australia’s total merchandise exports. And until late-2009, coal was also Australia’s biggest export commodity, only recently ceding its advantage to iron ore, courtesy of China’s fixed asset investment splurge in the wake of the Global Financial Crisis (GFC).
Despite falling to second place on the export rankings, the value of coal exports, as well as coal’s export share, has grown considerably since 2004, as Australia’s once-in-a-century commodity boom gathered pace (see next chart).
However, stiff headwinds could be building on both the supply and demand-side, which threaten to suck the steam out of Australian coal exports.
As noted previously, the US shale gas boom pushed down US natural gas prices to 10-year lows last spring. Unwanted at home, surplus US coal is being redirected into the seaborne export market, which is adding to supplies and depressing prices globally. In fact, 2012 set the all-time record for US coal exports — 125 million short tons, surpassing the previous record of 113 million short tons set in 1981 (see next chart).
To date, most of these exports seem to have headed to Europe, where it is displacing more expensive gas as a feedstock for power stations. According to the Financial Times, US coal exports to Europe increased by 29%, sending European coal prices plummeting from $130 a tonne in March 2011 to around $86 currently.
Locally, thermal coal prices have also taken a hit, with the benchmark Newcastle coal price falling by around 20% over the past year (see next chart).
There are also doubts over whether European coal demand will hold-up. New solar and wind capacity is coming on stream and ageing coal plants are being shut down amid heightened environmental concerns, with EU environmental policy calling for a 20% reduction in carbon emissions from 1990 levels by 2020, as well as a growing role for solar, wind and biomass in electricity generation.
Concerns are also rising in China about the nation’s addiction to coal-fired electricity generation. As noted last week, China is now burning nearly as much coal as the rest of the world combined (see next chart).
The problem is, pollution levels rocketed recently to 40-times recommended safe levels in many of China’s bigger cities, leaving many Chinese literally choking on smog (click to see photos). China’s Government responded with a series of temporary emergency measures such as shutting down 103 heavily polluting factories and taking 30% of government vehicles off the roads, but air quality has remained hazardous.
Public discontent also appears to be brewing. The Beijing News recently published an article demanding that a ‘Clean Air Act’ be enacted to “clarify the responsibilities of the national government at all levels, companies and the individual in air pollution control”. In a similar vein, thousands of Beijing residents have seemingly had enough and called for a Clean Air Act in an online vote on Sina Weibo, according to Xinhua News Agency.
The growing pollution problems in China are likely to cause a gradual shift away from coal fired electricity generation towards cleaner fuel sources, which could ultimately dampen demand for Australian coal at the same time as US coal exports are on the rise.
unconventionaleconomist@hotmail.com
Wouldn’t it be great if unbearable coalburn pollution caused a revolution in China and an overthrow of the communist system?
Suffocating smog from China reaches regions of Japan
“China is our neighbor and all sorts of problems happen between us all the time,” Takaharu Abiko, 50, said. “It is very worrying. This is dangerous pollution, like poison, and we can’t protect ourselves. It’s scary.”
They be Japanese factories using the power generated by the coal that is producing all that pollution (as well as American, European, Australian, Taiwanese and Korean factories).
We’re in this together.
It would be even greater if they could capture the coalburn, and then turn the sequestrate into a liquid hydro-carbon.
Cars and airconditioners for all.
Technofantasy.
CCS (carbon capture and sequestration) is almost universally acknowledge now as undoable.
Carbon capture is economically impractical
Heavier than air flight was once technofantasy.
You’re in the way, move aside.
On this I agree with R2M. Widespread CCS is about as likely as interstellar travel. Its damn near impossible because the numbers are so large.
From memory, the world’s coal-fired power stations produce around 20 cubic kilometres of CO2 per day. Where are we going to put that and hope it stays there?
Storing nuclear waste is easy in comparison.
Convert it to a liquid hydrocarbon on a daily basis, then sell it to chinese driving v8 engines.
Convert it to a liquid hydrocarbon…
And how much energy do you think THAT will require?
Solar PV has already reached grid parity with coal, divering a large fraction of coal-fired energy into CSS or converting CO2 back to complex hydrocarbons just tips the balance even further in favour of renewables.
Move aside.
??????? RP
“Convert it to a liquid hydrocarbon”
How?
We are hurting here in the Hunter…
Better than choking in Chongqing
… EU environmental policy calling for a 20% reduction in carbon emissions from 1990 levels by 2020, as well as a growing role for solar, wind and biomass in electricity generation.
IMF Chief: ‘Unless We Take Action On Climate Change, Future Generations Will Be Roasted, Toasted, Fried And Grilled’
Good, get rid of the dirty pollution producing, inefficient crap from the world energy markets. We can do better!
Leith this might interest you:
http://www.smh.com.au/business/carbon-economy/time-for-change-china-flags-peak-in-coal-usage-20130206-2dxrv.html
I have my doubts but time will tell. China also has to deal with the millions of vehicles forecast to come onto roads and the defective (but improving in some areas) industrial emissions controls.
Thanks mate. While other commentors bag you for being a vested interest, I appreciate how you always provide articles/data from all angles. Keep it up.
Cheers.
Now lets talk swings n roundabouts.
If coal is dumped what then?
There will be some dough in the switching from coal, for some one.
It will be a slow, probably very slow process.
http://www.theaustralian.com.au/business/mining-energy/international-coal-finds-high-quality-coal-in-jv-with-rinehart/story-e6frg9df-1226571470136
Note that ultra-cheap coal will provide a cheap carbon feed-stuff for conversion to other, more valuable ideas……
eg. fuel, chemicals, etc…
As a chemical/process engineer, I for one would be strongly considering the economics of such a potential!!
I can’t see China containing its coal usage. If coal is cheap, they will burn it, and to hell with consequences.
The only thing that will stop them is an energy source that’s cheaper (and more convenient) than coal.
I share that view.
+1 lorax
http://www.smh.com.au/business/mining-and-resources/too-late-for-china-to-cap-coal-use-at-4b-tonnes-20130206-2dy8k.html
Leith,
Why are you deleting the articles I post concerning record cold temps around the world? You willingly post alarmist articles every day, why not some balance?
I deleted it because your views on climate change are not relevant to the post.
GSM, the cold snaps we are seeing are a direct result of Arctic climate disruption. Please listen to a scientist (Paul Beckwith) explain it:
Download/Listen
GSM,
You posted news on Sunday about the Arctic ice caps growing at record rates as though it was ‘proof’ that AGW is a big lie and it seems that you are now trying to do the same.
The truth is that arctic ice is growing because it is now winter in the arctic. The fact that it is growing at record rates is an example of climatic instability and a new record is, by definition an extreme. The arctic ide dissappeared to a record extent during the (northern hemisphere) summer which was when it rose to such public awareness (with a bit of time lag)
Now please, I have not attacked you, I have critiques your argument. Can you please do the same for me? I apologise for upsetting you on Sunday.
If you are genuinely concerned with those record cold temperatures, why not take the information that you have and ask a proper climate scientist to interperet them for you? You could then educate yourself on the issue. That is what most of us are here for isn’t it – to educate ourselves? (note, I don’t know what they mean, IANACCS).
The truth is that arctic ice is growing because it is now winter in the arctic. The fact that it is growing at record rates is an example of climatic instability and a new record is, by definition an extreme.
In the same breathe, you provide why those doubting AGW hold their view, and why those numbers are growing.
Every event, after the fact, is being championed by those pushing the AGW wagon as proof, event if those events completely contradict previous forecasts.
If every events justifies AGW theory, then it is not falsifiable.
If the theory is not falsifiable, and god knows the AGW wagon have attempted to make scrutiny of pass forecasts so…. then it can’t be regarded as scientific theory.
Perhaps I was clumsy in the explanation of my thinking.
I am not offering this as proof of AGW, what I am saying that this new record growth of the sea ice is an example of the type of climatic instability that we are likely to see more of in the future.
I am also arguing that the fact that sea ice regrowing at record rates does not prove AGW theory wrong.
In the same breathe, you provide why those doubting AGW hold their view, and why those numbers are growing.
Can you explain what you mean please?
I once flew from HK to Beijing on a gorgeous sunny day, with no clouds, and did not see the ground once.
That is a very long way for unbroken smog.
They will learn, we did.
The western world had an industrial revolution, and at the beginning it was marked by horrendous levels of environmental degradation.
They are essentially going through it now.
It’s probably better to let them learn their lesson, rather than pontificating some chauvanistic decree.
Yes, funny thing is when you get to Hong Kong, you figure its about as bad as air pollution gets.
Once you make Beijing, you get the feeling someone locked you into a room with a 2 stroke generator running.
They really don’t have choice but to act
Leith, I think you are being a bit cavalier when you say ‘There are also doubts over whether European coal demand will hold-up. New solar and wind capacity is coming on stream and ageing coal plants are being shut down amid heightened environmental concerns”. You failed to mention that several countries in Europe have announced that they are building and planning many more new coal-fired power stations, and as most well-informed people know, the actual net contribution of solar and wind generation to supply remains minuscule, which makes it highly likely that European coal demand will rise rather than fall for the next decade or so at least.
Agreed. Sad, but true. Fukushima didn’t help.
Leith is not wrong:
http://www.smh.com.au/business/carbon-economy/time-for-change-china-flags-peak-in-coal-usage-20130206-2dxrv.html
Ah. Fresh air (gulp… gulp). Magic
Fresh air in a can. Lift to top and breathe it in.
Tasmania’s next export industry, targetted for China.
it’d be funny the carbon foot print of that. We did the bauxite out of the ground, ship it to China to process into the can, the empty cans shipped back to Launceston, then injected full or fresh air coming off the arctic, to then be shipped back to China.
will there be a diet version available?
Supposedly in Japan there’s Oxygen bars. You can get an oxygen hit out of a pipe for a couple of yen to get you going again. You have the supply – they have the distribution network
It’s true, and they are a great pick up, especially in the appalling air of central Tokyo.
The air quality in Japan is actually OK when the winds are coming straight off Siberia. But during the March W/SW winds coming straight from China the air quality is truly horrendous.
I can say first hand that oxygen is a winner for hangovers. Ask any nurse or welder who’s been around.
Spaceballs!!!