Thursday, January 8, 2015
Cyclical and structural headwinds undermine confidence in coal.
Since the start of January, Australian benchmark coal has dropped to 62.4 dollars per metric tonne (mt), 25% lower than a year earlier. A combination of climate change-related policies, the shale gas revolution in the United States, and a decline in the cost of renewable energy has heightened competition for coal. Demand has fallen since the industry reached peak production in 2012 following a wave of investment spurred by record prices in 2008 on the back of a rapid increase in demand in the Asia Pacific region.
- South-east Asia will be a bright spot for coal demand, as consumption is forecasted to double in Malaysia and Thailand.
- South Korea's 'Eurasia Initiative' will open a new market for Russian coal, using North Korean Rajin port.
- Japan will promote cleaner combustion technologies, known as ultra-supercritical, as more commercially and economically viable than carbon.
- Japan's return to nuclear energy could end a golden era for LNG and thermal coal exports to North-east Asia.