Spain is being paid €2.1 billion by the European Union to
close 26 coal mines by 2019. With a bleak future for coal-fired
power stations as well, there is unlikely to be an increase in
demand for thermal coal imports in the future.
Portugal saw increased power generation from strong hydro
availability and the use of renewable energy in the first half of this year. This impacted
coal consumption at the Sines and Pego
power stations. It appears, however, that
the thermal coal importers decided to build
their stocks amid this climate of lower coal
demand, and recorded imports were higher
than in the same period last year. South
African tonnage has been received, as well
as more Colombian material. Overall this
year, imports are forecast to reach around
4mt which would be some 1mt less than in
2015.
Coal demand in France has been weaker
this year after reaching around 8.3mt in
2015. The total could be around 2mt lower this year, and the country started the year with lower
consumption compared with early 2015. Nuclear generation
was also lower, but the overall electricity production level was
similar to the same period last year. The level was maintained by
increased use of gas, wind, and hydro.
Coal imports did not rise as much as they could have in the
early part of this year because consumers drew down from stockpiles, using up more than 1mt during the first four months
of 2016. Nevertheless, there was an increase in coal imports
during the four months to 30 April with 3.3mt recorded which
was 0.6mt higher than in the same period in 2015. Long haul
product from Australia increased by 588kt during that period
compared with 2015, to reach 664kt. Russia supplied 841kt and
the Colombian shippers sent 668kt during that period which were both higher than in the same period
the previous year. South African supply was
down by 295kt to reach 465kt, and US
exporters shipped only 74kt compared with
393kt in the same period last year.
The French coal-fired generating sector
has also been decimated by the European
Union with 3.5GW of capacity shut down
to comply with regulations issued in
Brussels. The country now has only
3.02GW of coal-fired generating capacity
left, and a further 0.6GW is being
converted to biomass fuelling. Coal
consumption in 2015 reached 3.4mt. A
government carbon tax looks set to reduce
coal consumption and therefore import demand to much lower levels in the coming years rendering
France a small market compared with what it was.
Belgium imported 1.7mt of thermal coal for its domestic use
last year, and has maintained trade at about 1.3–3.0mt over
recent years. Overall imports are recorded as higher because
other tonnage is shipped on to customers in other parts of
Europe. In 2015, the total import tonnage received in Belgium reached 3.174mt so almost half of that was then moved on to
other countries. Demand elsewhere in Europe determines the
overall volume arriving in Belgium, and this amounted to
5.632mt in 2010, of which only 1.322mt was consumed within
the country itself. Last winter, Belgium was burning more coal
than in the same period a year earlier and recorded 0.671mt
imported for its own consumption during the first quarter of 2016. This was 0.154mt higher then during
the same quarter in 2015. Most of the coal
came from Russia, which shipped 0.7mt and
recorded an increase of 0.1mt compared
with the first quarter in 2015. Total
imports reached 0.947mt this time. Coal-
fired electricity generation during the five
months to 31 May was lower compared
with the same period last year. Significant
increases were recorded for nuclear
generation which dominated the power
sector during that period after two
dormant nuclear power stations were
restarted last December. After shutting
down its nuclear assets, Germany then
found itself with these nuclear facilities operating on its doorstep again. While the Belgian nuclear plant
continue to operate, the demand for coal is set to diminish in
the country. Imports for its own use could drop to around 1mt
next year.
Denmark’s thermal coal demand has been declining in recent
years. Gas consumption for power generation has also
decreased as biomass fuel has grown in use, and the country also
imports electricity from neighbouring countries. The availability of hydroelectric
power from Norway has been notably
strong this year. Dong Energy has been
converting the 250MW Avedore and
375MW Stadstrup coal-fired power stations
to biomass firing, and HOFOR is doing the
same at the 95MW Amager 2 coal unit. By
2017 there will be even less demand for
coal in Denmark.
Thermal coal imports reached 2.77mt last year, compared with 4.23mt in the previous year. Colombian and Russian suppliers enjoyed some increase in
shipments during the early part of 2016, but at the expense of the South African exporters who saw no business in the first four months of this year compared with 0.17mt during the same
period in 2015. Less than 2mt of thermal coal imports has been
predicted for 2016.
Finland was one of the main consumers of coal in northeast
Europe, but again this has seen decreases in recent years from
5.7mt in 2011 to 2.2mt last year. The early part of this year saw
coal buck the trend and coal-fired power generation increased during the first few months of 2016. Total
thermal coal consumption in the first
quarter reached 1.11mt which was an
increase of some 4% compared with the
same period last year. There was a draw
down of coal stocks at the power stations
during that period from 3.5mt at the start
of January to 2.9mt at the end of March.
While imports tend to increase later in the
year in Finland in order to build up stock
requirements ahead of the winter, the
general decreasing consumption and import
trend is expected to continue. Almost
three quarters of Finland’s imported coal
comes from Russia, but the volumes have
been small this year. In fact, the year got off
Discussions with coal market traders at the time of writing indicated that positions had been taken which were keeping short term prices steady. This was particularly so for coking coal. Plenty of coal is still available from major suppliers. Freight rates are favourable for large Capesize cargoes to be shipped from Newcastle to Europe at present. Several cargoes of Australian thermal coal have arrived in north west Europe recently and more are due to be delivered in the coming weeks. The deals appear to have outwitted competitors trying to sell thermal coal from suppliers nearer to Europe and they have been unable to understand the finances of the Australian deals.
Thermal coal prices in Europe have been gaining ground at the time of writing, but coal stocks on the pads in the Amsterdam– Rotterdam–Antwerp ports have been increasing due to the reduced coal consumption over the summer months. These were approaching 4mt overall for all coal types in the three ports at the beginning of September. A July loading recently arrived from Newcastle with standard quality Hunter Valley product for a European utility. A similar cargo is en route for delivery in October, along with at least another two for one trader. The price of the coal at the time of the deals is believed to have been in the mid US$60s per tonne FOB (free on board) basis 6,000kcal/kg NAR.
With thermal coal prices having hit the lowest level for twelve and a half years in February this year, and since recovering, there is some optimism in the international coal market. The fundamental supply/demand situation may be moving more into balance, driven largely by cuts in production in China and the USA. While this may result in more activity in some world markets, the European thermal coal market operates within the European Union policy of greener power generation, at least for those countries subject to the rules set in Brussels. While the United Kingdom has voted to
leave the European Union, it is too late to address its
decommissioned coal-fired power stations, and how they might
have helped its coal industry and associated assets and businesses to operate, so coal demand will
now remain low there. In the years ahead
it could be a different scenario for the
future of coal trade in Europe if other
countries vote to leave the European Union
and find themselves able to consider their
own policies on coal utilization once more.
Dr Tim Jones is Director of e-coal.com
Consultancy and Editor of the weekly
publication Coal Market Intelligence which
covers 11 spot markets worldwide, gives key
information on the latest deals and tenders,
company news, people and jobs, industrial
relations, and ports, shipping, and freight rates.