No one is discounting China's future as a major thermal coal importer, but India will need increasing amounts of electricity if it is to fulfill its infrastructure growth plans, US coal export executives said Thursday.
India will be the big driver in the international thermal coal markets, McKinsey & Company consultancy partner Eugene Smit said at Platts 35th Annual Coal Marketing Days. It will need extra coal "to sustain some sort of economic growth" in the electricity-starved nation.
India will need an extra 250 million-350 million mt/year in thermal coal supplies by 2020, and China will need an additional 500 million to 1 billion mt/year of thermal supplies by 2030, and they likely won't produce all of that coal in-country, he said.
Both India and China are plagued by various problems in producing their own coal supplies, he said, including production and delivery logistics.
India, Smit said, has to come to terms with either settling for a modest rate of economic growth with the infrastructure at hand, or go full out to generate more electricity, building up to needed capacity, in order to fully harness its economic potential.
"India is at an inflection point," Smit said. "They either need to make peace with the fact that a shortage of energy is going to challenge economic growth or make major changes."
China, meanwhile, is expected to grow coal-fired power at a slower rate than other sources of energy, although it will remain a significant part of the energy pool.
Xcoal Energy & Resources CEO Ernie Thrasher said that while China set records for thermal coal imports in the first half of this year as a drought cut into hydroelectric production, that level has started to taper off on higher domestic thermal coal production.
"I think that China can sustain its own production at 4.4 billion mt/year, from 3.2 billion mt/year, but it will still need imports," he said.
China will import an estimated 190 million-200 million metric tons of thermal coal this year, said Thrasher, who has partnered with Pittsburgh-based Consol Energy and other companies to export US thermal and metallurgical coals.
As he said about met coal, Thrasher said he believes that export prices for thermal coal, as supply and demand are brought into balance, will resurge in the second quarter of 2013.
In other export markets, Thrasher said that European thermal coal demand remains strong due to nuclear power plant outages and high natural gas prices. Likewise, Japanese coal-fired power stations are operating at maximum capacity as that country too deals with the closure of its nuclear stations since the 2011 earthquake and tsunami, and high LNG prices.
Meanwhile, few nations can supply more than 100 million mt/year of thermal coal to these major customers, Smit said. Australia, Indonesia, US and Russia can do that.
But all these countries "suffer from regulatory challenges and infrastructure will need to be built."
