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China’s coal supply/demandChina’s coal supply/demand and their impact on and their impact on

international coal marketinternational coal market

George George Guanghua LiuGuanghua Liu

AAA Minerals InternationalAAA Minerals International www.aaamineral.comwww.aaamineral.com


Coal Coal factsfacts of China (1) of China (1)

• Raw coal output in 2004: 1.96 BMt Raw coal output in 2004: 1.96 BMt • Coal consumption in 2004: 1.8 BMt Coal consumption in 2004: 1.8 BMt • Recoverable reserves: 1,000 BMt Recoverable reserves: 1,000 BMt • Coal exports in 2003: 93 MMt (80 MMt in Coal exports in 2003: 93 MMt (80 MMt in

2004) 2004) • 67% of energy consumption from coal67% of energy consumption from coal


Coal Coal factsfacts of China (2) of China (2)• 28,000 Coalmines, but 95% are small mines (< 30,028,000 Coalmines, but 95% are small mines (< 30,0

00 tpa;00 tpa;

• Backward mining methods, only 40% has been meBackward mining methods, only 40% has been mechanized; the overall recovery of coal is < 30%; chanized; the overall recovery of coal is < 30%;

• > 65% of coal mines are operated over their capaci> 65% of coal mines are operated over their capacity; ty;

• Yearly increase of gangue-pile is over 130 MMt; YeYearly increase of gangue-pile is over 130 MMt; Yearly gas mission from mines is over 12 BM³; arly gas mission from mines is over 12 BM³;

• About 5,000 miners killed by accidents every year.About 5,000 miners killed by accidents every year.


ContentsContents 1. 1. ReviewReview o of Chinese coal production and f Chinese coal production and consumption; consumption;2. Outlook for Chinese steaming coal supply 2. Outlook for Chinese steaming coal supply and demand; and demand; 3. Outlook for Chinese coke supply and its 3. Outlook for Chinese coke supply and its demand; demand;44. . Tendency of Chinese coal export and Tendency of Chinese coal export and import; import;5.5. Conclusions of their impacts on Conclusions of their impacts on international market. international market.


Topic One:Topic One:

ReviewReview o of Chinese coal production f Chinese coal production and consumptionand consumption

• Chinese coal supply and demand underwent cyChinese coal supply and demand underwent cyclic changes from middle 1970s; the recent cyclclic changes from middle 1970s; the recent cycle began in year of 2000;e began in year of 2000;

• The changes are mainly caused by the governmThe changes are mainly caused by the government’s policies and GDP growth;ent’s policies and GDP growth;

• The influence of international coal market is liThe influence of international coal market is limited.mited.


Raw coal output from 1975 to 2005Raw coal output from 1975 to 2005 (Bt) (Bt)

0

0.5

1

1.5

2

2.5

19

75

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

e

Output

from 482 MMt in 1975 through1,374 MMt in 1996 to 998 MMt in 2000

from 998 MMt in 2000to 1.956 BMt in 2004


Domestic consumption of raw coalDomestic consumption of raw coalin China from 1980 to 2004in China from 1980 to 2004

(BMt)(BMt)

0

0.5

1

1.5

2

1980

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Consumption


Comparison between domestic raw coal Comparison between domestic raw coal output, consumption and GDPoutput, consumption and GDP

1980 through 20041980 through 2004 (BMt)(BMt)

0

0.5

1

1.5

2

1980

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ConsumptionSupply GDP

8

6

10*

*

**

* * * **

* * *


Power coal Met. Coal Export Other

Overall consumption mix of Chinese cOverall consumption mix of Chinese coal between 1995 and 2004 oal between 1995 and 2004

(MMt)(MMt)

30-55%10-15%


Coal consumption mix of ChinaCoal consumption mix of Chinain 2003 and 2004 in 2003 and 2004

(MMt)(MMt)

0

200

400

600

800

1000

1200

Pow ercoal

Met. Coal Cement Export Others

2003 2004


Topic Two:Topic Two:

Outlook for Chinese thermal coal Outlook for Chinese thermal coal supply and demandsupply and demand

• Thermal coal in China is not only used for Thermal coal in China is not only used for power generation, but also for industries apower generation, but also for industries and household as fuel and raw stuff;nd household as fuel and raw stuff;

• Thermal coal demand increased sharply iThermal coal demand increased sharply in the last 4 years, as a result of dramatic gn the last 4 years, as a result of dramatic growth of power output.rowth of power output.


Chinese thermal coal supply anChinese thermal coal supply and demandd demand

• Insufficient transportation and higher maInsufficient transportation and higher market coal prices are main causes resulting rket coal prices are main causes resulting in power shortfall overall in China in the pin power shortfall overall in China in the past. ast.

• Over-capacity-operated mines can not taOver-capacity-operated mines can not take pace with the continuous high growth rake pace with the continuous high growth rate of power coal demand; so more importete of power coal demand; so more imported coal may be necessary in the future. d coal may be necessary in the future.


0

10

20

30

40

50

60

0

0.5

1

1.5

219

80

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Consumption

Supply

Power generation consumes 30 to 55% of total coalPower generation consumes 30 to 55% of total coal

%

Domestic raw coal output and consumptionDomestic raw coal output and consumption


Output history of power generation of China; Output history of power generation of China;

the coal-fired power is 80% of the total the coal-fired power is 80% of the total

0

5000

10000

15000

20000

2500019

49

19

57

19

66

19

78

19

88

19

99

20

00

20

01

20

02

20

03

20

04

20

05e

Power outputTWh


Outlook of domestic power coal Outlook of domestic power coal demand in next 15 years, in demand in next 15 years, in

comparison with raw coal demandcomparison with raw coal demand(BMt)(BMt)

0

0.5

1

1.5

2

2.5

2004 2005f 2010f 2015f 2020f

Thermal coal Raw coal


Topic Three:Topic Three:

Chinese coke supply Chinese coke supply and demandand demand

• China is the biggest coke producer, exporter and consuChina is the biggest coke producer, exporter and consumer of the world; mer of the world;

• Both China’s and world’s demands for coke speeded Both China’s and world’s demands for coke speeded China’s coke production;China’s coke production;

• Coke exportation are discouraged by increasing domesCoke exportation are discouraged by increasing domestic demand, decreasing coking coal resources and shut tic demand, decreasing coking coal resources and shut down small coking ovens. down small coking ovens.


Chinese coke output is a big boy in the Chinese coke output is a big boy in the international coke market. In 2003 it made up international coke market. In 2003 it made up

46% of the world’s total coke production46% of the world’s total coke production..

China Coke Output46% Other Country's

Coke Output54%


Historical coke outputs of China and worldHistorical coke outputs of China and world(MMt)(MMt)

0

50

100

150

200

250

300

350

400

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

e

20

05

e

China World


Historical coke exports of ChinaHistorical coke exports of China and the rest world and the rest world

(MMt)(MMt)


Met. coal supply from 1995 to 2005 Met. coal supply from 1995 to 2005 (MMt)(MMt)

0

500

1000

1500

2000

2500

Raw Coal

Met. Coal

--- Met. coal resources is insufficient in China


Outlook of Chinese met. coal/coke Outlook of Chinese met. coal/coke supply/demandsupply/demand

• Domestic met. coal supply can meet the increasing demand in next 5 years, Domestic met. coal supply can meet the increasing demand in next 5 years, because: because:

1) total coking capacity will increase from 195 MMt in 2004 to 240 1) total coking capacity will increase from 195 MMt in 2004 to 240 MMt at end 2006, MMt at end 2006, 2) new coking coal mines will begin to produce in next years, and2) new coking coal mines will begin to produce in next years, and 3) growth rate of met industry is declining.3) growth rate of met industry is declining.


Outlook (continued):Outlook (continued):

•Coke production in China tends to reduce Coke production in China tends to reduce its growth rate, because: its growth rate, because:

1) more small ovens will be shut, 1) more small ovens will be shut,

2) demand tension began to relieve, 2) demand tension began to relieve,

3) coking coal supply remains tight as 3) coking coal supply remains tight as resources & transportation problems.resources & transportation problems.

Coke output may reach 210 MMt in 2005.Coke output may reach 210 MMt in 2005.


Outlook (continued):Outlook (continued):

•Coking coal and coke exports will Coking coal and coke exports will continue to reduce, as the domestic continue to reduce, as the domestic demand and the increasing capacity of demand and the increasing capacity of international coke makers.international coke makers.

• China may import gradually more high China may import gradually more high quality coking coal.quality coking coal.


Topic Four:Topic Four:

International coal trade of China International coal trade of China

** China is the second largest coal exporter:China is the second largest coal exporter:

0

50

100

150

200

250

Australia China Indonesia SouthAfrica

America India Poland

ExportImport

MMt


China’s coal export increased rapidly from 2000 to 2003, but began to decline in 2004; more coal importation may occur in the coming years. These changes strongly affect the world coal market.

0

20

40

60

80

100

1995 1997 1998 1999 2000 2001 2002 2003 2004 2005e

Export Import Trends (Export)

MMt


33%

28%

23%

2%

6%

3%4%1%

Japan Korea Taiwan Hongkong

Southeast Asia Europe India Others

* The main importers of Chinese coal are Japan, Korea, Taiwan,

Europe, India and other SE Asian counties.

Destinations of Chinese exported coal in 2004


Exported coal types of China in 2004 (steExported coal types of China in 2004 (steaming coal is 80% , anthracite 7% , cokiaming coal is 80% , anthracite 7% , coking coal 6 %).ng coal 6 %).

Steaming coal

Anthracite

Coking coal

Other


Outlook of import and Outlook of import and exportexport• Export will gradually decline; 2005 Export will gradually decline; 2005

maintains the same level of 2004 at 80 maintains the same level of 2004 at 80 MMt.MMt.

• Import tends to increase, mainly by south Import tends to increase, mainly by south and south-eastern China.and south-eastern China.


Topic five:Topic five:

ConclusionsConclusions

1) Growth rate of raw coal output will 1) Growth rate of raw coal output will slow down in next two years, then slow down in next two years, then output will decline as a result of output will decline as a result of reducing mining capacity.reducing mining capacity.


Coal output capacity could not meet the demand after Coal output capacity could not meet the demand after 2006; more mine investment and coal2006; more mine investment and coal

importation are the solutionimportation are the solution

0

0,5

1

1,5

2

2,5

3

2000 2001 2002 2003 2004 2005f 2010f 2015f 2020f

Capacity Demand

BMt


Conclusions (continued)Conclusions (continued)

2) Growth of domestic demand for both 2) Growth of domestic demand for both coking and steaming coal will slow down coking and steaming coal will slow down in late 2005 and 2006; in late 2005 and 2006;

3) Coal export is declining and import is 3) Coal export is declining and import is increasing, which results in the changes increasing, which results in the changes of world coal market patterns;of world coal market patterns;

4) Chinese coal market is still under 4) Chinese coal market is still under control of the government, especially for control of the government, especially for power coal market and exportation. power coal market and exportation.


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