Of all raw materials, coal is expected to remain the dominant fuel for electricity generation in the world as a whole, and in particular in many countries from Central and Eastern Europe, for a considerable time in the future. However, the opportunities for coal in this market will depend upon the ability of coal to remain a competitive source of energy in terms of both environmental viability/acceptability and security of supply.
The South Eastern Europe market severely felt the eﬀects of the recession in 2009 and, according to experts, it will take some time for the market to recover. However, the CEE market is still gaining momentum, having come out of the recession virtually unscathed. There have been structural improvements to trading regimes which has compensated for the poor economic situation leading to an increase in trading volume. Experts in the field also say that it is necessary for CEE and Western markets to share their wealth of understanding about these markets with their neighbours to the south in order to generate new potential.
The world’s coal reserves are extraordi-narily large and widely dispersed. Coal is safe and easy to transport, and it can be readily stored. Reflecting these attributes, as well as the reserves base of developing economies including China and India, coal use is now growing at a higher rate than other fossil fuels, according to experts from the Coal Industry Advisory Board (CIAB). Their opinion has been presented within a report on the 2009 growths of the coal market. A CIAB study reveals that the United States of America has 41% (almost half being in undeveloped regions of Alaska), China has 32% and Russia has 17% of hard coal resources. America and the CIS account for 86% of hard coal reserves, of which 36% are in Asia (almost exclusively China and India), 33% in North America (almost exclusively the United States), and 17% in the CIS.
Most of the lignite resources are located in only three regions: North America, the CIS and Asia. About one third of global lignite resources are located in North America (35%) and in the CIS region (31%). The largest lignite resources are in the United States (33%), Russia (31%) and China (8%). In Europe, but also in Asia, Russian remains the greatest coal extractor and exporter.
According to ROSSTAT statistics (Russian Federal State Statistics Service), coal production in the first half of 2009 totalled 137.2 million tonnes, 14.8% lower than in the first half of the previous year, while the June 2009 figure was only 7.6% lower than in June 2008, shows the CIAB report. One specific example of the effects of the global financial crisis on the Russian coal industry is that the global steel maker ArcelorMittal, which operates three coal mines in Kemerovo province in central Russia, is now seeking to cut production and staff at the mines, which employ about 6,000 people.
Recovery on the Asian market
Before the financial crisis there was a shortage of rail cars for coal transportation in Russia, although this has been tempora-rily alleviated during the recession. In the first half of 2009 hard coal loaded to rail was 14% lower than in the first half of 2008 and the total volume of rail car loading showed a 23% reduction.
World hard coal production has continued to grow strongly over the last eight years, with the 2008 level over 60% higher than in 2000, a rate of growth averaging over 6% a year. Nearly 70% of this 2.2 billion tonne growth was accounted for by China. In 2009, the coal production in the countries member of the Organisation for Economic Co-operation and Development (OECD) increased by only 1%.
The effects of the world financial crisis and the resulting slump in economic growth prospects started to hit the freight market in September 2008 and rates had slumped to historically low levels by the end of the year. The economic downturn had a severe impact on the iron and steel industry, reducing imports of iron ore and metallurgical coal everywhere but China. The impact was less pronounced for thermal coal.
Since the beginning of 2009, a slight recovery has been observed, although rates remain highly volatile. They remained very low in the first four months of 2009 – below USD 10/t. From May 2009 they started to climb again, driven by increasing iron ore and coal imports into China, and settled at USD 18-20/tonne in June-July 2009. The second half of 2009 was again marked by high volatility, with lows of USD 11/tonne in September and highs of USD 21/tonne in November. In 2009, China more than doubled its coal imports to 127 million tonnes.
In February, China signed an energy cooperation agreement with Russia to offer USD 6 Billion in loans in exchange for coal imports. Under the agreement, China will import 15 million tonnes of coal annually from Russia over the next five years, and then 20 million tonnes annually for 20 years following the initial five-year period. In exchange for coal imports, China will supply Russia with USD 6 Billion in loans to finance resource exploration projects, railway construction and mining machinery purchases. The National Energy Admini-stration’s deputy director, Wu Yin said China produces 45 percent of the world’s coal, but energy demands are growing faster than its production capacity.
by Elena Ilie