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Renaissance For Coal In Asia

April 3, 2017

By Paul Homewood



It looks as if the obituaries for coal may have been a bit premature, as this slew of stories emphasises:




In the dusty scrub of the Thar desert, Pakistan has begun to dig up one of the world’s largest deposits of low-grade, brown, dirty coal to fuel new power stations that could revolutionize the country’s economy. The project is one of the most expensive among an array of ambitious energy developments that China is helping the country to build as part of a $55 billion economic partnership. Pakistan relies on coal for just 0.1 percent of its power, according to the Pakistan Business Council. The Thar projects and others could see that jump to 24 percent by 2020, according to Tahir Abbas, analyst at Karachi-based brokerage Arif Habib Ltd. Pakistan’s coal reserves would give the nation a cheap domestic alternative to expensive oil and gas imports.





Just a few short years ago, few would have dared to predict that coal could have a future in the energy policies of emerging and developed countries alike. Yet the fossil fuel is undergoing an unexpected renaissance in Asia, buoyed by technical breakthroughs and looming questions about squaring development with energy security.

For Japan, coal has emerged as the best alternative to replacing its 54 nuclear reactors, which are deeply unpopular with the population and seen as symbols of devastation after the Fukushima Daiichi nuclear disaster six years ago. Mindful of the public mood, the government of Shinzo Abe has completely given up on the country’s dream of nuclear self-sufficiency, and pulled the plug in December on the $8.5 billion experimental reactor project at Monju. On February 1, the government pledged to decommission all reactors and replace them with 45 new coal-fired power plants equipped with the latest clean coal technology. In this, Tokyo seeks to achieve two overreaching goals: preserve its energy security and stay on course to fulfill the obligations set forth by the 2016 Paris Climate Agreement.

But why did Abe go with coal and not renewables or, say, natural gas? After Fukushima, Japan initially ramped up its imports of liquefied natural gas, but realized that LNG would be prohibitively expensive in the long-term. Cost-conscious, the government has instead opted for high-efficiency low-emissions (HELE) coal plants and plans to market its clean coal technologies abroad in addition to implementing them at home. Coal power already made up 31 percent of Japan’s energy mix in 2015 but under the current plan, the fossil fuel will become the country’s primary power source by 2019.




An Important shift is now underway in global coal trade. With a completely new export route opening up for U.S. producers over the last few weeks.

To South Korea.

Platts reported yesterday that coal buyers in Korea have seen a surge of bookings for U.S. thermal coal. With sources telling the news service that 1.5 million tonnes of total U.S. supply have now been arranged for delivery between July and September.

This isn’t just a one-off transaction either. With all five of Korea’s utilities having reportedly booked U.S. exports for Q3.

That big shift for Korea’s coal buyers is happening largely due to changing regulatory rules. With a new tax regime on coal imports into Korea scheduled to take effect as of April 1.

The new tax rules favor imports of lower-calorie coal — with the 5,000 kcal/kg mark being an important financial threshold for buyers. Under the revised tax scheme, coal shipments less than 5,000 kcal/kg will be assessed import duty of 27,000 won per tonne ($24.30/t).

By contrast, shipments between 5,000 and 5,500 kcal/kg will be taxed at 30,000 won/t ($27/t), while coal above 5,500 kcal/kg will see a rate of 33,000 won/t ($29.70/t).

All of which means that Korean buyers want coal below 5,000 kcal. But not too much so, as really low-value supply won’t be as functional in power generation.

U.S. coal fits that bill perfectly. With American producers putting out a 4,850 kcal/kg product that attracts the lowest tax rate but still provides a lot of energy per tonne.

That ideal market position looks set to create a mini-boom for U.S. exports into Korea. With the 1.5 million tonnes booked so far this year already representing a 43 percent increase on U.S.-sourced shipments for all of 2016 — when Korean buyers brought in just 1.05 million tonnes for the entire year.

That could give a lift to some U.S. miners. Particularly those in Wyoming and Montana, which have ready access to Pacific Coast export terminals such as Canada’s Westshore facility. Watch for more import deals being struck, and for figures on rising Korean demand for American product.

Here’s to a window opening.

  1. AZ1971 permalink
    April 3, 2017 5:56 pm

    So the signatories to the Paris Accord are in effect saying “Do as I say, not as I do”.

    • HotScot permalink
      April 3, 2017 7:43 pm

      But they are saying it very quietly. It’s only because a very few of us, including our alarmist brethren, seek out the truth, rather than listening to the MSM, and we learn what is actually going on, often behind the scenes.

      The Paris Accord, along with most of the politically motivated AGW rubbish is being quietly sidelined. Governments and industries will gradually begin to justify their move back to fossil fuels, and the science Paul and many others have been promoting will be rolled out as evidence the climate isn’t going haywire.

      The money for the most extreme alarmist’s will dry up, so the source of the drive behind AGW will gradually decline, they will become the minority in any remaining climate debate.

      It took Obama to whip the world into climate hysterics, now he’s gone, the world can return to the normality of reasoned scientific debate on the subject. And as governments, science and industry start to roll the message out to the MSM, they’ll start printing it.

      No government will condemn Japan for their activities, replacing nuclear with ‘clean’ coal, following Fukishima. The Green Goblins have painted themselves into a corner with that one. They have been howling for nuclear to be replaced with renewables, all but the most fanatical of them know renewables can’t meet demand.

      So they have their nuclear wish, and it will be obvious to even the most committed MSM journalist that Japan has no other option, well, except for the Guardian nutters of course.

      The Chinese, Indians and Pakistanis will cite Japan as a very good reason for their coal use and, as has been noted, demand for US coal will increase.

      This is a coming wave of energy and industrialisation that will demonstrate practicality over theories that have consistently failed to materialise. Over the coming generation we will see the rise of the Indian sub continent rise just as China’s has. Then there’s Africa and South America who have both been howling for the resources to join everyone else at the top table of prosperity.

      And just as a bit of a wacky observation. Doesn’t it seem uncannily coincidental that just as planet earth was stricken with the coldest period of its existence, along with it’s lowest ever atmospheric CO2 concentration, man’s industrial release of naturally, but accidentally, sequestered CO2 began to happen?

      It could almost convince one there is a higher authority.

  2. markl permalink
    April 3, 2017 6:13 pm

    The world is steadily increasing the use of fossil fuels despite the alarmist cries. If the alarmist are so sure this will lead to catastrophe wouldn’t it be in everyone’s best interests to switch to adaptation rather than mitigation?

  3. April 3, 2017 6:48 pm

    The Asian coal renaissance was certainly unexpected in Guardian-land only 2 weeks ago.

    Headline: Coal in ‘freefall’ as new power plants dive by two-thirds

    ‘Paul Massara, the former chief executive of RWE Npower and now head of a green energy company, North Star Solar, said: “The decline in new coal plants in Asian countries is truly dramatic, and shows how a perfect storm of factors are simply making coal a bad investment.” ‘

    Japan, South Korea, Pakistan – hello?

  4. John F. Hultquist permalink
    April 4, 2017 2:41 am

    Westshore is Canada’s busiest coal export terminal, handling more than 33 million tonnes of coal annually and providing billions in dollars of export revenue for Canada and British Columbia.

    Meanwhile, the Great State of Washington thinks it can save the Planet by not allowing coal to pass through its lands and on to consumers. It would rather struggle to fund education as required by Court orders.
    Environmental concerns about energy transport through the Northwest — both coal and oil — have grown in recent years as projects like the Gateway Pacific Terminal were put forward. Municipal leaders in cities from Spokane to Seattle said trains carrying coal from mines in Montana and Wyoming, or oil from North Dakota, posed risks: air pollution caused by dust, traffic congestion caused by mile-long trains and the potential catastrophe of derailments in urban areas.

    The coal in question is to be exported, not used in the State of Washington.
    In fact, WA does get some power from coal burned in Montana (I think) but intends to stop that source.

    • John F. Hultquist permalink
      April 4, 2017 2:46 am

      Sorry, I did not realize the photo and statement would appear.
      The decision was a political act (Obama related) and has almost nothing to do with the environment in WA State. There is much info on this. Follow it if you like.

      • nigel permalink
        April 4, 2017 9:12 am

        So Canada gets the profitable business? Good for them.

  5. Ex-expat Colin permalink
    April 4, 2017 9:23 am

    Sturgeon in California..signing up to Climate Change crap?

    Must admit I never knew of this organisation and wonder what authority the Scottish Govt(?) has in signing such like.

    • tom0mason permalink
      April 4, 2017 10:59 am

      When will all of Britain get a referendum asking whether or not to eject Scotland from the Union? I think a good date would be the same week as Sturgeon sets for a Scottish referendum.

      👿 🙂

      • John Palmer permalink
        April 6, 2017 5:08 pm

        +1 – I don’t think it’d be a very close vote though!

  6. April 4, 2017 3:00 pm

    You blend coal just as you do oil. So you get 4850 kcal/kg not because it comes that way but because you blend it that way.

    You could sell them high cal coal and let them blend it as their power plant needs.

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