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Page added on February 18, 2016
The Decline Of The Coal Industry Is “Long-Term” And “Irreversible”
Demand for thermal coal is declining, a trend that appears to be “irreversible.”
That is the conclusion from Goldman Sachs, which published a new report on the global coal and gas trade on February 15, and reported on by SNL. For coal producers, this is the latest in a long line of grim warnings, all of which point to a future of shuttered power plants, mine closures, and bankruptcies.
Last fall, Goldman Sachs made headlines when it predicted that “peak coal” was drawing near. “The industry does not require new investment given the ability of existing assets to satisfy flat demand, so prices will remain under pressure as the deflationary cycle continues,” the investment bank wrote in September 2015.
The reaffirmation of that belief in its latest report will make less of a splash, if only because there is a growing realization that the coal industry is dying. Nevertheless, Goldman offers some new insights about the direction for the industry.
For much of the last decade, with coal consumption flat or declining in most of the industrialized world, there was still a massive lifeline for coal producers. China’s explosive growth led to a seemingly endless appetite for coal, despite bleak and deteriorating air quality in many of its cities. But, after years of blistering growth, China’s coal burning came to a screeching halt, likely hitting a peak in 2013.
With China’s coal market hitting a peak and entering decline, India is supposed to take over as the last vestige of growth. In the IEA’s 2015 World Energy Outlook, it published a lengthy section on India, placing it front and center as the single most important country to watch in terms of its influence on the future of energy markets.
India is supposed to add almost 900 million metric tons of new coal demand by 2040. To put that into context, it is more than twice as much demand as the rest of the world is expected to add combined over that timeframe. Coal demand in the U.S., EU, China, and Japan, to name a few, will fall from here on out.
So coal producers will simply export their coal to India, right? The problem with that plan is that India is set to ramp up its own domestic production of coal, cutting out the need to import more. India used to suffer from a shortage of supply, which led to a costly import bill and even routine blackouts in its electricity sector. But Indian mines are now churning out more coal, and stockpiles are rising. India’s increasing ability to meet its own demand for coal, Goldman Sachs says, will mean “the peak and decline in seaborne trade volumes may arrive earlier than we had previously expected.” The bank cut its forecast for thermal coal prices in Newcastle, Australia – a key global benchmark – to just $45 per tonne in 2018, down from $48 per tonne this year.
But the worst news for the industry is this: While oil and natural gas could see prices rebound as demand rises, coal has very little hope of ever seeing a price rebound again. Goldman sees long-term coal prices at $42.50 per tonne. “Unlike most other commodities, thermal coal is unlikely to experience another period of tightness ever again because investment in new coal-fired generation is becoming less common and the implied decline in long-term demand appears to be irreversible,” Goldman Sachs’ analysts concluded.
Even India will fail to make up for the shrinking thermal coal market in the rest of the world. In its latest report, Goldman downgraded cut its demand forecast for thermal coal – in September it predicted that by 2019, the world would be burning 2 percent less coal than it did in 2013. Now, it says thermal coal demand will drop by 7 percent.
This is horrific news for coal mining companies. It also ensures that the list of coal companies that have declared bankruptcy – at least several dozen in the last four years – will continue to grow.
By Nick Cunningham of Oilprice.com
20 Comments on "The Decline Of The Coal Industry Is “Long-Term” And “Irreversible”"
Davy on Thu, 18th Feb 2016 6:15 am
Coal is here to stay in the energy mix of our status quo global world. The numbers are too big and the scale of transition too long and costly for an end of coal. Coal will likely continue a decline but there is a huge built out coal infrastructure from decades of development. It is a baseline power source that renewables will never be able to replace. Natural gas will make more inroads but at a decreasing rate.
We still have significant resources to be mined. How long will coal last is more related to how long will our status quo global economy last in its current form. Even if we have a collapse coal is just too well placed to deliver vital electricity even if that is a localized effort. We can reasonably say we have seen peak coal but we will not see the end of coal until we see the end of industrial civilization.
Go Speed Racer on Thu, 18th Feb 2016 6:42 am
Bring back steam engines, NOW.
https://drscdn.500px.org/photo/40486616/m%3D2048/fcc81c4269edd33e41da7e2196a47693
It spurs demand for talented industrial workers. Also it will increase demand for coal. Finally, if there is a coal shortage, you can mix in some garbage, shredded tires and old PVC pipe, and it will run just as good.
rockman on Thu, 18th Feb 2016 7:14 am
“For much of the last decade, with coal consumption flat or declining in most of the industrialized world, there was still a massive lifeline for coal producers. China’s explosive growth led to a seemingly endless appetite for coal, despite bleak and deteriorating air quality in many of its cities. But, after years of blistering growth, China’s coal burning came to a screeching halt, likely hitting a peak in 2013.” Another piece of intentionally misleading propaganda IMHO. Either from a clueless “greenie or a coal industry shill. The latest global coal consumption number from the EIA is for 2012. Over the previous 6 years global coal consumption increased almost 20%.
And the big ridiculous LIE: “…China’s coal burning came to a screeching halt…”. While the GROWTH in Chinese coal consumption has slowed it’s estimated that China will burn 3.96 BILLION TONS (http://www.reuters.com/article/us-china-energy-idUSKBN0UC0YN20151229). That’s more coal then China has ever burned per year prior to 2011.
According to Reuter’s projection there will be some very minor changes in Chinese primary energy sourcing in 2016: non-fossil fuels increase 1.2% to 13.2% and coal decreases 1.8% to 62.6%. That’s 62.6% of all Chinese energy production coming from coal. And they say China’s coal burning “came to a screeching halt”. It’s very difficult to believe that their editor was so brain dead that he didn’t realize how absurd that statement is so I have to assume the attempt to misinform the public was intentional.
Simon on Thu, 18th Feb 2016 7:15 am
Hi Dave
You are right, coal is a wonderful baseline power source, so a coal generator will run economically all the time, with other generators coming into the mix as required.
Currently renewables are having a pop at gas, King Coal is safe, however as more and more are rolled out, sooner or later they will have an impact, but I reckon coal is safe for the foreseeable (3 years)
Simon
sidzepp on Thu, 18th Feb 2016 7:42 am
2012 World electricity generation by fuels (IEA, 2014)[2]:24 Coal/Peat (40.4%) Natural Gas (22.5%)Hydro (16.2%)Nuclear (10.9%)Oil (5.0%)Others (Renew.) (5.0%)
If coal were to be discontinued as the main generator of electricity, what sources would make of the loss of 40% of generating power. The most obvious choices would be natural gas and oil and that would mean prices of both fuels would skyrocket and create more turmoil in the world.
eugene on Thu, 18th Feb 2016 7:58 am
Before this is done, we will use every available source to it’s bitter end and the consequences be damned. We are on a one way road here.
Course if climate continues to run away, those changes may bring an end first.
Simon on Thu, 18th Feb 2016 8:05 am
Sid
Those figures whilst factually accurate do not actually make the basis of an argument, as leccy is priced on a country basis, and each country has a different mix of energies.
Whilst some would experience major problems, others would notice only a minor increase.
simon
sidzepp on Thu, 18th Feb 2016 8:31 am
The world is addicted to fossil fuels that provide the world with most of its energy needs. As we continue blindly on our path of self destruction the world will continue to take expediency over the environment as long as we have continued economic growth. We are long past the point of sustainability. The only question remaining is when the nightmare will start.
onlooker on Thu, 18th Feb 2016 9:16 am
I second what sid says we are wed to fossil fuels not just out of luxury but need as well. Need to feel all the people of the world and need to keep modern economies viable. So yes we are deep into overshoot and the only question for the past 10 or 20 years has been when will severe consequences set in. Well they are starting to.
adamc18 on Thu, 18th Feb 2016 9:20 am
Interesting new figures on climate change suggest that we stop restricting the debate to the effects in the year 2100. If we do nothing, sea levels will rise over the next few hundred years by 25 metres (about 83 feet).. If we continue to burn fossil fuels (if we have enough) at recent rates of growth,the forecast over several hundred years is 80 metres (270 feet). Of course there are all the other things like droughts, floods, methane ‘bob’ extinction event on the way.
But the big question is; how responsible do we feel for ‘several hundred years ahead’?
sidzepp on Thu, 18th Feb 2016 9:35 am
Most Americans cannot look beyond their next paycheck or the third round of the American Presidency circus.
JuanP on Thu, 18th Feb 2016 9:44 am
“Demand for thermal coal is declining, a trend that appears to be “irreversible.””
Irreversible my ass! We will burn everything, it is only a matter of when and how, not if. The last of us will be picking up twigs and grass to burn on our rocket stoves to keep warm, boil water, and cook food. Not a lump of coal or peat, a tree, or a grass mat will outlast us. We will burn anything that combusts, including our own wastes. It will take a few more decades, but we will get there.
Human intelligence, creativity, and ingenuity guarantee that! We are the absolute best species at destroying the biosphere, no other species comes even close. We are Numero Uno.
“Total destruction is the only solution
and there ain’t no use, no one can stop it now” Bob Marley
sidzepp on Thu, 18th Feb 2016 9:57 am
When man created God in his own image that is when Homo Sapiens Sapiens began their long spiral descent into hell.
JuanP on Thu, 18th Feb 2016 10:23 am
Sid, That is one awesome sentence you just composed there. I am borrowing it!
sidzepp on Thu, 18th Feb 2016 10:39 am
Thanks Juan, communalism is about sharing and lifting each other up. It is about tearing down the walls that separate us and building bridges to unite us. Poor Karl if he had only found a good PR firm.
shortonoil on Thu, 18th Feb 2016 11:50 am
If one visits the Appalachian area they will find thousands of abandoned coal mines. These mines were not abandoned because there was no market for their coal; they were abandoned because they were depleted out. The Appalachian vein runs from West Virginia to the Mississippi River. By the time it reaches the Mississippi it is 3000 feet deep. When using post and beam mining more, and more of the coal must be left to support the roof as the vein gets deeper and deeper. Consol #9, out of Morgantown, WV was 29 miles from the temple to the mine face when it was abandoned. Why these authors are allowed to write articles on resource extraction when none of them seem to understand its most fundamental obstacle; depletion is beyond understanding. Just like petroleum, the US coal fields are badly depleted out. Just like oil their cost of operation is going up, and their production is, or will be soon following. That is simply the inevitable outcome of resource extraction.
godq3 on Thu, 18th Feb 2016 4:35 pm
shortonoil: “…and their production is, or will be soon following.”
In recent months US coal extraction rate is down some 30% year over year (EIA weekly data).
makati1 on Thu, 18th Feb 2016 8:05 pm
We will dig and burn coal until it is no longer available. We will burn oil and natural gas until they are no longer available. The addiction in most countries is too deep and ingrained to be overcome easily, even if there was a majority that wanted to.
The only way to stop it is a war that stops everything, including life on this planet.
makati1 on Thu, 18th Feb 2016 8:13 pm
Over 7,212 million tons of hard coal and 801.5 million tons of lignite are mined world wide. That means that the world burns over one ton per each of us 7,400,000,000+ people every year.
That ton plus produced most of the electric you use. It is the 400+ slaves an average American has at his/her disposal. When are you going to fire yours? Pun intended. ^_^
simonr on Fri, 19th Feb 2016 4:39 am
As far as electricity is concerned.
We are addicted to cheap electricity.
We will use whatever is the cheapest resource first. When fossil fuel costs start to rise, then other forms of generation rise up the merit order.