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Interview: Hugh Lee, Independant Coal Consultant

Hugh talks prospective coking coal prices, the industry implications of Chinese and Indian import fluctuations and how current prices are affecting the global market structure.


 

Q:  What is the most significant feature :affecting international coal trade at the moment?

A:  The fall in Chinese coal imports.  China’s steam coal imports increased markedly each year from 2009 to 2013, as China’s indigenous production could not keep up with the increasing demand from electricity generation for the rapidly growing economy.  Most traders thought this would continue but, in 2014, imports fell substantially and they are continuing to fall this year.  There was much more hydro generation last year and the oldest dirtiest coal-fired power stations are continuing to be closed.

Q:  What are the prospects for coking coal prices?

A:  World demand for steel will continue to grow, especially in the fast growing economies in Asia.  There will always be a limited availability of scrap iron, so the need for steel from blast furnaces will rise and this will require increasing quantities of met coal.  International coking coal trade will therefore grow steadily and the market will come back into balance, lifting prices out of their current doldrums, but this may take some time.  In the longer term, carbon capture and storage will be needed for blast furnaces, as there is no alternative technology for new steel making.

Q:  How are the current low prices affecting the structure of the world coal industry?

A:  Quite a number of coal mining companies in the leading exporting countries are in trouble.  The result is that not only are high cost mines being closed but also the largest companies are taking the opportunity to acquire the mining asserts of struggling companies.  This is a repeat of the consolidation that occurred during the last period of depressed coal prices.  This will increase the market power of the producers.

Q:  Will the world steam coal market be helped by a continued rise in India’s imports?

A:  Yes.  India’s fast growing economy will continue to be fuelled by coal for some time.  The (relatively new) government wants indigenous production to rise rapidly so that imports can be reduced, but such ambitions have never been realised in the past.  In the longer term, the falling cost of solar panels and batteries is likely to make inroads into coal demand, especially in rural areas where villages without grid connections may leapfrog to this emerging technology.

Q:  Do you think any new coal-fired power plants could conceivably be built in the UK in future?

A:  Environmental regulations will prevent any new coal-fired power stations being built in the UK for several years.  However, carbon capture and storage (CCS) will become a successful commercial technology sooner or later.  There is already a full scale coal power station with successful CCS at Boundary Dam in Canada.  CCS could compete with solar power in the UK and other countries with limited sunshine.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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