In 2013, coal added more primary energy than any other fuel and was the fastest-growing fossil fuel. 2013 coal demand grew 2.4% on a tonnage basis, more than oil and gas, enhancing its position as the second-largest primary energy source and closing the gap with oil. This trend, driven by the role of coal as the main provider of electricity, is a déjà vu of our annual Medium-Term Coal Market Reports.
Similarly, the People’s Republic of China was once again driving this growth. Growth in China (196 million tonnes [Mt]) was actually larger than global growth (188 Mt). In the United States, 2013 higher gas prices prompted coal demand to recover part of its 2012 decrease.
In Europe, low power demand and increasing renewable production squeezed coal power generation, causing an overall coal demand decline of -35 Mt when compared to 2012. In Japan, where the coal fleet fully recovered and two new coal plants commenced commercial operations, coal demand grew +6.4%.
Coal markets show great dynamism
Despite coal’s reputation as a 19th-century industry, coal markets are changing at a fast pace. Former parameters age rapidly, and new trends appear. Demand is moving to Asia, and trade flows are following. A great variety of different coal qualities are traded, including low quality high ash coal, triggering new price indices. While long-term contracts still operate, quarterly, monthly and spot purchases become more frequent.
There is increasing use of derivatives both in volumes and coal qualities, origin and destinations. Some policy changes – and these are announced frequently – in countries such as China and Indonesia have the potential to impact the global market. Changes are happening at both large and small scale. As one example, Central Appalachia, once the largest producing area in United States, now lags behind both Powder River Basin (PRB) and Illinois Basin.(Source: IEA)