Demand for Australia’s thermal coal exports to be dire in future, IEEFA report warns

5-Nov-2018

Economists are predicting Australia’s thermal coal exports to plummet faster than expected due to falling demand across Asia that appears permanent and irreversible.

A study by the Institute for Energy Economics and Financial Analysis (IEEFA) found Australia’s top four export markets — China, Japan, Taiwan and South Korea — were shifting rapidly to renewables.

The study found New South Wales, the source of nearly 70 per cent of thermal coal exports, should brace for disruption in energy markets.

IEEFA is a not-for-profit institute, funded through philanthropy, with a focus on green technologies and renewable energy.

An analysis of international data in the report found global demand for thermal coal would drop 28 per cent by 2025.

The decline will continue, and be 59 per cent by 2040, the report says.

The figures are drawn from the International Energy Agency (IEA), which models trade data against climate policies and new technologies.

IEEFA’s report found the key issues facing Australia’s thermal coal industry

• Total coal demand in Japan, NSW’s largest market, is expected to drop 71 per cent in the long term
• Total demand for coal in China, NSW’s second-largest export market, is forecast to fall 57 per cent by 2040
• The Port of Newcastle, the world’s largest coal export facility, is currently operating with 24 per cent spare capacity — and is a “stranded asset risk”
• Coal is expected to account for just 11 per cent of the world’s energy mix by 2050, from a high of 40 per cent in 2010

Thermal coal growth expected: Industry

The report’s dire predictions on global demand for thermal coal are at odds with industry forecasts.

New South Wales Mineral Council chief executive Stephen Galille said the thermal coal sector in NSW was “looking good”, with growth expected in emerging markets.

“We’re also seeing record levels of coal exports through the Port of Newcastle with steady growth in demand, particularly from traditional Asian markets such as Japan,” he said.

Australia is the world’s second largest exporter of thermal coal, and industry estimates are predicting price rises and export growth in Asia linked to population growth in emerging markets like Bangladesh and the Philippines.

But Tim Buckley, one of the IEEFA study’s authors, said these forecasts ignore both the falling price of renewable energy, and global action on climate change.

“I think we are taking a very substantial economic and societal risk by refusing to acknowledge the magnitude and speed of the technology disruption,” he said.

“It means we’re not going to have a plan.”

The study also revealed approvals of new coal-power generation has slumped by 74 per cent in China, India, South Korea and Taiwan over the past three years.

According to IEEFA’s report, these “rapidly transitioning” countries will close down more coal power plants than are being commissioned by 2022.

The falling cost of solar batteries, wind and emerging technologies such as hydrogen is behind the trend, the report found.

The report also found the downturn will “hit NSW Government revenues” hard.

It points out the NSW Government’s long-term forecast is for thermal coal exports to increase by 1.2 per cent per year — a prediction the report described as “hopelessly out-of-date”.

Energy Minister Don Harwin was approached for comment.

IEEFA’s report argued the NSW Government must develop a “planned transition” to “protect return on investment and re-organise” from reliance on thermal coal.

Source: ABC NEWS