- IEA predicts coal demand will remain around record levels in 2023, driven by China, India and South-East Asia
- Exports of thermal and met coal could outstrip 2019 record
- Rio boss admits China steel may have peaked
Coal is on the nose with investors, activists, governments and bankers.
Yet new figures show the demonised commodity, burnt by power plants which generate around a fifth of the world’s CO2 emissions, will continue to see demand remain at record levels in 2023.
The International Energy Agency last week said coal consumption rose 3.3% to 8.3Bt in 2022, with power generation and industrial coal demand keeping it around those record levels in 2023 and 2024.
It highlights a major challenge in the drive towards Net Zero. For many economies there remains either an inability or unwillingness to switch from fossil fuels to a cleaner source of energy and while the transition continues, overall demand for coal will remain stronger and stickier than many hope and expect.
According to the IEA coal use will fall sharply in the EU as renewables, nuclear and hydropower use increases, while cheaper gas prices has helped switching in the US, with demand falling in those markets by 16% and 24% respectively.
But a 5% growth expected in Chinese and Indian demand will more than offset declines elsewhere, with China, India and South-East Asia accounting for around 3/4 of the coal consumed worldwide.
Yikes.
“Coal is the largest single source of carbon emissions from the energy sector, and in Europe and the United States, the growth of clean energy has put coal use into structural decline,” IEA director of Energy Markets and Security Keisuke Sadamori said.
“But demand remains stubbornly high in Asia, even as many of those economies have significantly ramped up renewable energy sources.
“We need greater policy efforts and investments – backed by stronger international cooperation – to drive a massive surge in clean energy and energy efficiency to reduce coal demand in economies where energy needs are growing fast.”
Coal supply could break record
Covid and a string of weather and logistics problems placed a lid on coal supplies in the past three years, playing a big role in the price boom to over US$400/t seen after Russia’s invasion of Ukraine last year.
Lower prices in 2023 — around US$140/t yesterday for 6000kcal high CV coal out of the Port of Newcastle — have made coal more attractive for buyers.
The IEA expects seaborne coal exports worldwide could break the record of 1.3Bt traded in 2019. Indonesia, the world’s biggest thermal coal exporter, became the first jurisdiction to ship in excess of 50Mt in one month in March, while China and India domestically exceeded 400Mt and 100Mt of output in the same month to set new records.
The IEA thinks exports of thermal coal will lift 5.2% this year to 1.099Bt, while met coal shipments could life 11% to 340Mt, with the 1.335Bt rate implied by those numbers outpacing the 1.331Bt exported in 2019.
Much of that will be land trade between Mongolia and China.
Coking coal futures were paying US$237.30/t yesterday. They remain at extremely high levels historically despite being well done on the highs of early 2022.
It is an attraction of the bidding process for two met coal mines currently on the market from BHP (ASX:BHP), Daunia and Blackwater. The BHP assets are expected to fetch into the billions and have drawn reported interest from locally listed players Yancoal (ASX:YAL), Coronado (ASX:CRN) and Whitehaven (ASX:WHC) among others.
ASX coal stocks
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CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % MARKET CAP NAE New Age Exploration 0.005 -17% 0% -38% -17% $ 7,179,494.55 CKA Cokal Ltd 0.125 9% 4% -34% -30% $ 134,868,622.50 BCB Bowen Coal Limited 0.095 -39% -41% -67% -67% $ 234,958,446.58 SVG Savannah Goldfields 0.075 -17% -29% -59% -63% $ 17,822,207.86 GRX Greenx Metals Ltd 1 9% -11% 30% 300% $ 264,692,570.83 AKM Aspire Mining Ltd 0.092 21% 31% 42% 1% $ 43,656,780.71 AVM Advance Metals Ltd 0.007 0% 0% -36% -30% $ 4,119,911.08 YAL Yancoal Aust Ltd 4.98 -3% 9% -15% -1% $ 6,734,241,128.70 NHC New Hope Corporation 5.37 -3% 11% -8% 22% $ 4,488,032,809.89 TIG Tigers Realm Coal 0.005 -29% 0% -64% -71% $ 65,333,511.84 SMR Stanmore Resources 2.87 1% 11% -17% 54% $ 2,532,910,491.54 WHC Whitehaven Coal 6.94 -6% 3% -16% 9% $ 5,789,277,425.28 BRL Bathurst Res Ltd. 0.99 0% 1% 15% -3% $ 191,359,780.00 CRN Coronado Global Res 1.675 -4% 9% -19% 30% $ 2,799,677,729.10 JAL Jameson Resources 0.051 -28% -14% -46% -27% $ 19,967,066.10 TER Terracom Ltd 0.43 5% 2% -49% -45% $ 328,396,156.35 ATU Atrum Coal Ltd 0.005 0% 0% -17% -14% $ 6,958,495.86 MCM Mc Mining Ltd 0.16 7% 23% -44% -5% $ 64,945,595.33 DBI Dalrymple Bay 2.8 2% 6% 12% 35% $ 1,368,302,200.92 AQC Auspaccoal Ltd 0.14 -7% 8% -36% 33% $ 53,833,197.72
Is this as good as it gets for Chinese steel?
Iron ore prices should, by conventional fundamentals, be looking a little bearish right now.
But the expectation of Chinese stimulus packages is continue to keep them upwards of US$100/t, fetching around US$106.50/t yesterday afternoon in Singapore.
The big hope is that looser credit lines will spur investment in infrastructure and property in China, where steel rebar prices have come down from highs of over US$800/t in 2021 to US$535/t yesterday.
That has occurred as Chinese authorities have capped steel output at below previous year’s levels since hitting its apex in 2020.
Speaking to media after a Melbourne Mining Club speech in Victoria yesterday, the boss of the world’s largest iron ore producer, Rio Tinto (ASX:RIO) CEO Jakob Stausholm was accepting of the idea that steel production had peaked.
“I think we will see the steel production in China going slightly down in the course of this decade. It’s not about the short term, but really towards the end of the decade it might be flat, or it might be a little bit lower. But historically still at very, very high levels,” he said via The Australian.
“I think you will see growth elsewhere. And I think you will see a number of Chinese steel mills as well having steel production elsewhere.
“Because of Chinese steel mills, they might actually decide to have more steel mills in Indonesia or in the Middle East rather than China. So for me, that’s not so important. I’m more interested in global development.”
However, China’s steel output falls have so far been so incremental as to be virtually cosmetic, remaining slightly above 1Bt for each of the past three years. BHP’s chief economist Huw McKay talked up the idea earlier this year of a plateau in Chinese steel production between 1-1.1Bt, likely to remain above the billion tonne mark for a 5-6 year period.
ASX iron ore stocks
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CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % MARKET CAP ACS Accent Resources NL 0.008 -27% -27% -68% -83% $ 5,204,400.11 ADY Admiralty Resources. 0.007 0% 17% -42% -22% $ 9,125,054.07 AKO Akora Resources 0.2 0% 18% 21% 25% $ 18,996,562.80 BCK Brockman Mining Ltd 0.031 0% -3% 19% -6% $ 287,687,196.06 BHP BHP Group Limited 46.37 1% 3% -6% 19% $ 233,078,403,781.56 CIA Champion Iron Ltd 6.07 2% -0% -18% 22% $ 3,092,814,893.48 CZR CZR Resources Ltd 0.145 -3% -17% -37% -45% $ 35,360,196.90 DRE Dreadnought Resources Ltd 0.053 -5% 2% -50% -22% $ 173,041,867.44 EFE Eastern Resources 0.01 -9% 0% -44% -60% $ 14,903,357.53 CUF Cufe Ltd 0.016 23% 14% -30% -16% $ 14,491,685.48 FEX Fenix Resources Ltd 0.3 -6% 5% 11% 5% $ 208,248,576.00 FMG Fortescue Metals Grp 21.98 -5% -1% -2% 21% $ 66,751,959,422.24 FMS Flinders Mines Ltd 0.48 1% 7% -2% -9% $ 81,047,316.96 GEN Genmin 0.18 0% 6% -12% -28% $ 81,275,982.12 GRR Grange Resources. 0.525 -9% -2% -51% -54% $ 624,962,896.92 GWR GWR Group Ltd 0.094 16% 47% 52% -1% $ 27,624,632.33 HAV Havilah Resources 0.275 10% 28% -19% 4% $ 79,159,802.50 HAW Hawthorn Resources 0.12 -8% -14% 20% 36% $ 40,201,873.56 HIO Hawsons Iron Ltd 0.038 -10% 3% -52% -88% $ 33,086,558.12 IRD Iron Road Ltd 0.089 1% 22% -23% -36% $ 71,813,341.01 JNO Juno 0.075 -4% 7% -35% -40% $ 10,716,982.08 LCY Legacy Iron Ore 0.019 6% -5% 12% -10% $ 115,322,871.58 MAG Magmatic Resrce Ltd 0.075 1% -17% -32% 10% $ 22,926,959.85 MDX Mindax Limited 0.06 -9% -3% 2% 2% $ 124,779,085.58 MGT Magnetite Mines 0.42 -1% 9% -7% -66% $ 32,284,363.83 MGU Magnum Mining & Exp 0.047 -6% 114% 74% 12% $ 33,083,376.04 MGX Mount Gibson Iron 0.47 -1% 8% -24% -8% $ 570,777,086.51 MIN Mineral Resources. 71.55 1% 0% -21% 33% $ 13,891,752,400.92 MIO Macarthur Minerals 0.21 11% -5% 25% 14% $ 34,829,232.48 PFE Panteraminerals 0.071 -11% -18% -47% -43% $ 3,862,584.00 PLG Pearlgullironlimited 0.027 -10% 0% -10% -27% $ 4,223,238.43 RHI Red Hill Minerals 4.4 -1% -1% -6% 33% $ 284,035,263.05 RIO Rio Tinto Limited 116.87 -2% 2% -9% 18% $ 43,458,282,172.98 RLC Reedy Lagoon Corp. 0.008 -8% 38% -17% -41% $ 4,533,756.81 CTN Catalina Resources 0.004 -20% 33% -60% -50% $ 4,953,947.57 SRK Strike Resources 0.063 2% -13% -31% -52% $ 18,443,750.00 SRN Surefire Rescs NL 0.0155 -3% 3% 11% -9% $ 24,770,452.16 TI1 Tombador Iron 0.024 4% 26% -8% 0% $ 47,291,362.21 TLM Talisman Mining 0.145 0% -15% -15% -9% $ 29,189,654.10 VMS Venture Minerals 0.015 0% 7% -42% -46% $ 27,300,182.49 EQN Equinoxresources 0.12 -4% 14% -31% -11% $ 5,400,000.12 AMD Arrow Minerals 0.004 0% 14% -43% 33% $ 12,095,060.38