Renaissance For Coal In Asia
APRIL 3, 2017
By Paul Homewood
It looks as if the obituaries for coal may have been a bit premature, as this slew of stories emphasises:
In the dusty scrub of the Thar desert, Pakistan has begun to dig up one of the world’s largest deposits of low-grade, brown, dirty coal to fuel new power stations that could revolutionize the country’s economy. The project is one of the most expensive among an array of ambitious energy developments that China is helping the country to build as part of a $55 billion economic partnership. Pakistan relies on coal for just 0.1 percent of its power, according to the Pakistan Business Council. The Thar projects and others could see that jump to 24 percent by 2020, according to Tahir Abbas, analyst at Karachi-based brokerage Arif Habib Ltd. Pakistan’s coal reserves would give the nation a cheap domestic alternative to expensive oil and gas imports.
sltrib.com
Just a few short years ago, few would have dared to predict that coal could have a future in the energy policies of emerging and developed countries alike. Yet the fossil fuel is undergoing an unexpected renaissance in Asia, buoyed by technical breakthroughs and looming questions about squaring development with energy security.
For Japan, coal has emerged as the best alternative to replacing its 54 nuclear reactors, which are deeply unpopular with the population and seen as symbols of devastation after the Fukushima Daiichi nuclear disaster six years ago. Mindful of the public mood, the government of Shinzo Abe has completely given up on the country’s dream of nuclear self-sufficiency, and pulled the plug in December on the $8.5 billion experimental reactor project at Monju. On February 1, the government pledged to decommission all reactors and replace them with 45 new coal-fired power plants equipped with the latest clean coal technology. In this, Tokyo seeks to achieve two overreaching goals: preserve its energy security and stay on course to fulfill the obligations set forth by the 2016 Paris Climate Agreement.
But why did Abe go with coal and not renewables or, say, natural gas? After Fukushima, Japan initially ramped up its imports of liquefied natural gas, but realized that LNG would be prohibitively expensive in the long-term. Cost-conscious, the government has instead opted for high-efficiency low-emissions (HELE) coal plants and plans to market its clean coal technologies abroad in addition to implementing them at home. Coal power already made up 31 percent of Japan’s energy mix in 2015 but under the current plan, the fossil fuel will become the country’s primary power source by 2019.
thediplomat.com
An Important shift is now underway in global coal trade. With a completely new export route opening up for U.S. producers over the last few weeks.
To South Korea.
Platts reported yesterday that coal buyers in Korea have seen a surge of bookings for U.S. thermal coal. With sources telling the news service that 1.5 million tonnes of total U.S. supply have now been arranged for delivery between July and September.
This isn’t just a one-off transaction either. With all five of Korea’s utilities having reportedly booked U.S. exports for Q3.
That big shift for Korea’s coal buyers is happening largely due to changing regulatory rules. With a new tax regime on coal imports into Korea scheduled to take effect as of April 1.
The new tax rules favor imports of lower-calorie coal — with the 5,000 kcal/kg mark being an important financial threshold for buyers. Under the revised tax scheme, coal shipments less than 5,000 kcal/kg will be assessed import duty of 27,000 won per tonne ($24.30/t).
By contrast, shipments between 5,000 and 5,500 kcal/kg will be taxed at 30,000 won/t ($27/t), while coal above 5,500 kcal/kg will see a rate of 33,000 won/t ($29.70/t).
All of which means that Korean buyers want coal below 5,000 kcal. But not too much so, as really low-value supply won’t be as functional in power generation.
U.S. coal fits that bill perfectly. With American producers putting out a 4,850 kcal/kg product that attracts the lowest tax rate but still provides a lot of energy per tonne.
That ideal market position looks set to create a mini-boom for U.S. exports into Korea. With the 1.5 million tonnes booked so far this year already representing a 43 percent increase on U.S.-sourced shipments for all of 2016 — when Korean buyers brought in just 1.05 million tonnes for the entire year.
That could give a lift to some U.S. miners. Particularly those in Wyoming and Montana, which have ready access to Pacific Coast export terminals such as Canada’s Westshore facility. Watch for more import deals being struck, and for figures on rising Korean demand for American product.
Here’s to a window opening.
oilprice.com
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