US plans to shut down coal industry, China's could be damaged

Want ChinaTimes, Staff Reporter 2012-08-13

A coal storing site at Lianyun harbor in Jiangsu province. (Photo/Xinhua)

After the US Energy Information Administration announced that the US would close down a large number of coal-fired power-generation units, Chinese industry experts said the announcement could impact international coal prices and was bad news for China's coal-fired factories, which were witnessing a decline in investments, the Shanghai-based First Financial Daily reported.

The administration of President Barack Obama is expected to close down 57 coal-fired plants by the end of 2012. The goal is to bring a complete halt to the US coal industry. Meanwhile, the energy administration also said 175 coal-fired plants with a total generation capacity of 27 million kilowatts would suspend operations between 2012 and 2016, according to foreign media reports.

Lin Boqiang, director of Xiamen University's China Center for Energy Economics Research, doubts that the US will close down a large number of coal-fired units.

Lin told the newspaper that coal accounted for about 23% of the total energy consumption in the United States, while natural gas accounted for 27%, oil accounted for one-third and renewable energy accounted for only 1.7%. The proportion of natural gas in the US energy consumption was unlikely to increase sharply enough to replace coal in the next few years. Further, closing coal-fired plants is a very costly enterprise.

The new development, if it were to happen, would undeniably impact international coal prices, Lin admitted. The United States has the largest coal reserves in the world. After shutting down coal-fired power plants, its coal would be used for exports alone. As long as the global markets were aware that the US no longer used coal, coal prices would fall.

Currently, the US has about 500 coal-fired power plants. While coal provides about one-third of the electricity in the country today, it provided nearly half of it four years ago. The close dependence of electric utilities on coal has already been falling, the report noted.

Given the decline in US domestic coal consumption, an increase in exports had become inevitable.

In recent years, the US large-scale development of relatively inexpensive shale gas is expected to allow shale gas to gradually replace oil and coal. The energy administration said in their Short-Term Energy Market Forecast Report that the demand for coal by the US power industry this year would reduce to 884 million short tons (1 short ton=0.907 tons), a decline of about 5% year-on-year. The proportion of coal-fired power in the total capacity of the country would drop to 40.4% from 42.2%.

A major export market for US coal, Europe is seeing declining demand for coal due to its economic slowdown and increasing awareness of environmental issues. On the other hand, Asia's economy is relatively strong and has a strong demand for coal. Therefore, heavy Asian coal users such as China, Japan and South Korea are being targeted by the US for coal exports.

Industry experts predicted that US coal exports in 2012 would increase 16%, while European imports would decline 1 million tons.

According to China Customs' statistics, in June, China's total coking-coal imports were 6.49 million tons, an increase of 67.9% over the previous month and a 94.4% growth over the same period last year. Of the total imports, 998,000 tons were from the United States, accounting for 15% of the total.

Chinese industry experts said that since it would take time for the US to close its coal-fired units, this would not directly affect the Chinese market.

Zhao Yuwei, an industry expert, said he was more worried that their plan to shut down coal-fired power plants would negatively affect investments in China's thermal-power sector.