Coal is still one of the world’s greater resources both in terms of abundance and usage and like it or not, its consumption has grown steadily in recent years. In fact, world coal consumption has grown steadily in the past decade.
Coal prices have also increased in this time. They fell during the global financial crisis (2008-09) and, along with iron-ore prices, fell in 2012, as production finally appeared to have caught up with consumption.
There has been some recovery since, and it’s expected that world coal consumption will continue to grow steadily over the next five years, according to a Report released in December 2012 by the International Energy Agency (IEA).
Those banking on a reduction in coal demand pin their hopes on China, which accounts for nearly 50% of world’s coal consumption. The new Chinese government has flagged its intention to lessen the country’s reliance on coal.
But China, however, according to the Report, appears to still be as ambivalent as some other governments about coal, wanting to reduce its most obvious adverse effects (e.g. dirty power plants and dangerous coal mines), but not wanting to undermine its own economic growth prospects.
And with hundreds of new coal-fired power plants planned, it will continue for some time to provide strong support for coal, says the Report.
Furthermore, coal is still the most competitive source of power generation in many countries. Nuclear energy remains in the doldrums. Renewable energy is still costly. The drop in natural-gas prices since 2011 in the US, for example, which has led to natural gas replacing coal for power generation, is turning around.
And, so far, there is no alternative to metallurgical coal for steel manufacture and as a result, the Report says the prospects for coal over the next two-three years are good.
Over the next 12 months, IEA expects coal prices to increase steadily, reaching at least US$120 per tonne for thermal coal. (Sources: BP, International Monetary Fund. Consumption is in million tonnes of oil equivalent. Prices are for thermal coal, in US$ per tonne.)