Chinese coal miners (FT)

Chinese coal miners (FT)

Resource consulting firm, Wood Mackenzie put out a report Monday stating that by 2020, coal will surpass oil as the key fuel for the global economy.  Global coal consumption is expected to rise by 25% on the backs of China and India as they fill demand for cheaper energy sources to meet their fuel needs.  By 2020 coal consumption is anticipated to surpass 4,500 million tonnes of oil equivalent overtaking oil by 100 million tonnes.

“China’s demand for coal will almost single-handedly propel the growth of coal as the dominant global fuel,” said William Durbin, president of global markets at Woodmac. “Unlike alternatives, it is plentiful and affordable.”

China has no viable alternatives to coal.  Natural gas has limited domestic output and LNG imports are much more costly than coal.  Coal is about 1/3 the price of Asian LNG and ½ the price of European gas.

Surprisingly, given the current regulatory and policy environment, coal demand in North America and Europe is expected to hold flat during the next decade.

In the short term, the street remains bearish on the price of coal given a near-term increase in low quality coal output.  In Europe prices have fallen 20% and have fallen from a high of $130 per tonne in Australia in 2011 to the current $80 per tonne.

By 2035 it is estimated that coal will supply Southeast Asia with half of its energy needs, up from 30%.

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