Era Of Strong Coal Demand Growth Is 'Over', IEA Declares

Fairfax - Angela Macdonald-Smith

Global coal demand has stalled in the face of "tremendous pressures" from the Chinese downturn and the drive for energy efficiency, the International Energy Agency says.

The IEA has dramatically downgraded forecasts for coal demand. Photo: Andrew Quilty

The International Energy Agency's findings that global coal demand has stalled in the face of "tremendous pressures" from a downturn in use in China and action on climate change have reignited calls from environmentalists for Australia to prepare for a future without the fuel.
In its annual outlook for coal, the closely-watched IEA slashed its five-year forecast for coal demand growth by more than 500 million tonnes, and admitted what several environmental organisation have been claiming, that coal use in China may have peaked two years ago.

The Paris talks were the first admission that the age of fossil fuels is coming to an end and this report is another nail in coal's coffin. Shani Tager, Greenpeace Australia

The era of strong coal demand growth is "over", IEA executive director Fatih Birol said. China, the growth-engine of world energy and coal demand for the last decade, was entering a "new era" where demand would be flat at best over the next five years.
While the IEA still forecasts growing Australian thermal coal exports, it cast serious doubt for the first time on the proposed Galilee Basin projects in Queensland, including the highly-controversial Carmichael mine owned by India's Adani Group, and projects owned by GVK-Hancock and Waratah Coal.
It is not likely the Galilee projects "will be operational in 2020, if ever," the agency said.
Worldwide coal consumption dropped in 2014 for the first time this century, the IEA said, sliding by 0.9 per cent to 7.92 billion tonnes, including a more pronounced 2.2 per cent dip in the OECD region. That stands in sharp contrast to the average growth of 4.2 per cent a year in the past decade.

China is the main reason
"The coal industry is facing huge pressures, and the main reason is China – but it is not the only reason," Dr Birol said, pointing to worldwide environmental policies including last weekend's historic climate agreement in Paris.
The IEA still forecasts global coal use will rise over the next five years, but at a marginal rate of just 0.8 per cent a year. The additional 275 million tonnes of demand would take consumption to 5.81 billion tonnes by 2020.
The weaker forecasts are set to resonate across the industry, given the IEA numbers are regularly cited by mining companies and governments as evidence of the continuing importance of coal in the energy mix.
It comes as coal miners struggle with multi-year lows in both thermal and coking coal prices that have forced the cancellation and deferral of projects and cost thousands of jobs in eastern Australia alone.
In China, coal use dropped 2.9 per cent last year though the country still accounted for half of global demand. Consumption in 2020 is expected to be similar to levels of 2013, and could be much lower.
The new vision for Chinese demand caused the IEA to model a separate "Chinese peak case scenario", in which energy-intensive industries slow further. In that case, Chinese demand drops by 203 million tonnes by 2030, wiping out any growth in demand on a worldwide basis.
But Minerals Council of Australia chief executive Brendan Pearson said the new forecast does not translate to a reduction in Chinese demand for high quality coal imports, including from Australia.
"China's coal use overall may flatten out, but demand for high-quality coal for HELE [high efficiency, low emissions] plants is likely to grow," Mr Pearson said.
He noted that some 420 gigawatts of new HELE coal generators are planned or under construction in China, with 60GW of capacity ordered in the first nine months of 2015 alone.

Age of fossil fuels "ending"
But Greenpeace called on Australia not to ignore the warnings on coal use.
"The Paris talks were the first admission that the age of fossil fuels is coming to an end and this report is another nail in coal's coffin," Greenpeace Australia Pacific climate campaigner Shani Tager said.
The Institute for Energy Economics and Financial Analysis, which releases anti-fossil fuel research, said arguments around HELE plants and carbon capture and storage "lack substance".
Dr Birol lamented the "terribly slow" process in carbon capture and storage, which he said was "bad news for the environment, but is much worse news for the coal industry".
One of the few market bright spots is south-east Asia, where demand is seen growing at 7.8 per cent a year, ahead of Indian consumption growth put at 4.1 per cent.
Global coal production also fell for the first time this century in 2014, despite output increases of 7 per cent in Australia and 9.6 per cent in India.