The reports of coal’s death are greatly exaggerated…at least in the short term
This week we will take a look at what we call “Other Atlantic” (Turkey, Brazil, Ukraine, the US, Israel, Morocco and Egypt). As a group these countries imported 97Mt of coal in 2015, up 3% from the previous year.
The import in the first 8 months of 2016 is on par with last year with gains in Turkey, Morocco and the Ukraine offset by losses in Israel, Brazil and the US. Below we will have a closer look at the growth prospects for each of the countries.
The biggest importer within this group is Turkey with an import of 34Mt in 2015, which is up more than 50% from 2010 as the thermal coal fleet has expanded from 10,000MW to 15,000MW in the same period. About 7,500MW of the current capacity relies on import. We expect Turkish coal imports to continue to grow at a strong pace going forward as there is more than 3,600MW currently under construction (whereof 2,700MW are import based) and another 8,000MW has been permitted (whereof 6,400MW are import based).
The second largest importer within this group is Brazil with 23Mt imported in 2015, a new all-time high. Imports in the first 8 months of 2016 are down 6% year on year. We expect the growth in thermal coal imports to be limited going forward as there currently is only one thermal coal plant with a capacity of 340Mw under construction, but we do expect some small gains in the coking coal import.
The third largest importer within the “Other Atlantic” group with 15Mt of imports in 2015. The direction of Ukrainian import will to a large extent depend on whether the Ukrainian thermal coal plants will regain access to the coal deposits in eastern Ukraine.
U.S. imported 9.3Mt in 2015 (excluding imports from Canada), which was marginally lower than the previous year. Imports in the first 8 months of 2016 is down 11% from the same period in 2015. The US coal fleet is shrinking but we expect thermal coal plants in the US Gulf and Florida, which relies on Colombian import to remain competitive. We thus expect US coal imports to be fairly range bound going forward.
Israel imported 9.8Mt in 2015 (based on customs data from exporting countries), which was down 20% from the previous year. In the first 8 months of 2016 imports are down another 19% from the same period in 2015. According to the national coal supply corporation, coal consumption is expected to decline going forward due to the increasing usage of gas. However, coal, which currently is providing 60% of electricity consumption in Israel, will continue to serve as a significant energy source for electricity production. We thus expect coal imports to gradually decline going forward.
Morocco imported 6.5Mt in 2015, which was marginally down from the previous year. In the first 8 months of 2016 imports are up 14% from the same period in 2015. Morocco currently have 2 new thermal coal plants under construction with an expected start date in 2018. This will boost the thermal coal capacity and import with more than 50%.
The last country in the Other Atlantic group is Egypt where coal imports today are virtually non-existing. However, this will change going forward as the cement and brick industry now are allowed to switch from gas to solid fuels as a feedstock. The government is also discussing to build several new coal fired power plants which may boost coal imports further down the road.
This completes our series in 6 parts regarding the seaborne trade of coal. All in all, we expect the growth in coal imports into Emerging Asia, Stable Asia and in the Other Atlantic group to offset any negative growth in imports into the EU in the next 3-5 years. Unsurprisingly, this leaves India and China as the decisive countries for the growth prospects in the seaborne trade of coal. We expect strong demand growth in India but are uncertain about to what degree this will be offset by domestic production growth. In China we expect more or less flat demand in the coming years, while there are huge uncertainties related to the level of their domestic coal production, which is the 2.5 times the size of the global seaborne market.