Despite shutdown of nuclear power plants, Japan is not expected to raise its thermal coal imports significantly over the next five-seven years, as existing coal-fired power plants are running at high rates and new facilities are still on the drawing board, analysts and market sources said.
The increase in Japanese steam coal imports over 2014-21 will be modest and Japanese power utilities would not be able to replicate the year-on-year increases seen in the fiscal year ended March 2014, Singapore-based analyst with Standard Chartered Bank, Serene Lim, said Friday.
"Japan is a mature thermal coal market. It is not possible for it to further increase coal imports at levels we have seen in the previous fiscal year. The coal demand growth this year and the immediate succeeding years will be very modest," Lim said.
For fiscal year 2013-14 (April-March), Japan imported 111.52 million mt of thermal coal, up 5% year on year, latest data from Japan's Ministry of Finance showed.
The Federation of Electric Power Companies in Japan said on its website that the country's 10 major power utilities consumed a record 59.93 million mt of coal in the fiscal year ended March 31, up 19.3% from the previous year.
Indonesia supplies nearly 40-45 million mt of thermal coal each year to Japan, while Australia supplies about 70 million mt, according to sources.
"It will be not be feasible for Japanese power utilities to substantially increase their thermal coal imports because their coal-fired power plants are already running at 80-85% of their installed capacity," Lim said.
There are no new coal-fired power plants scheduled to come online this year, and final approvals for the ones planned for 2020 have yet to be obtained, said industry sources last week.
"Most coal-fired power plants are at full capacity. Accordingly, Japanese utility companies may not increase their coal procurement," an analyst from Standard & Poor's, who declined to be identified, said Friday.
"Most of the existing coal-fired power plants are old ones. So we think that the upside potential in utilization capacity is limited," he said.
The rise in coal consumption in fiscal year 2013-14 was largely due to additional imports required for two new coal-fired power plants which went online last year -- Tokyo Electric Power Company's 1,000 MW Hitachinaka No. 2 and 600 MW Hirono No. 6 coal-fired units, a Japan-based source said.
Japan's coal use has gone up after its power utilities were left with no option but to run their coal-fired power units at high capacities to cope with the shutdown of nuclear power plants after the 2011 earthquake and tsunami disaster.
Japan has lost about 30% of its electricity generating capacity after all its 50 nuclear reactors with a capacity of more than 46,148 MW went offline, the electricity federation said.
For fiscal year 2010-11, Japan's power generation mix was 8% hydropower, 23% coal, 31% LNG, 5% oil, 31% nuclear and 1% renewables, a Japan power utility source said. In comparison, for fiscal year 2013-14, the mix was 8% hydropower, 27% coal, 48% LNG, 15% oil, 1% nuclear and 1% renewables, the source said.
UNSURE ABOUT NUCLEAR RESTART
It is still not clear when an approval to restart the nuclear reactors could be obtained. Applications to re-start 16 reactors at 10 power plants have been lodged with authorities, the utility source said.
Japan's current coal consumption is dependent on nuclear power resumption. But its steam coal use will not be drastically reduced even if nuclear reactors restart because utilities would first idle power plants running on expensive fuel oil, another utility source said.
Coal consumption by some Japanese utilities could, however, decline if they get approval to re-start their nuclear reactors as coal plants are already long overdue for a periodic maintenance, he said.
Coal-fired power plants need to be put on mandatory periodic maintenance after two or three years of continuous operation, but the electricity generation emergency in Japan forced most utilities to operate them for four straight years amid the shutdown of the nuclear reactors.
The first utility source said Japan's electricity generation mix for the current fiscal year 2014-15 is expected to be 8% hydropower, 27% coal, 48% LNG, 5% oil, 10% nuclear and 1% renewables.
The nuclear power generating forecast assumes 16 nuclear reactors will be allowed to resume operations, he said, but added that such a projection "was a little bit optimistic."
The prolonged shutdown of Japan's nuclear power plants has prompted utilities Kansai Electric and Chubu Electric to "seriously consider" starting new coal-fired power plants to replace lost nuclear generating capacities, the S&P analyst said.
Kansai and Chubu are planning to construct coal-fired power plants with capacities of 1,000 MW and 1,500 MW, respectively, targeting commercial operations by 2020, he added.
Tohoku Electric is also planning to build a new coal plant but details about this were not immediately available, he said.
The first utility source expects about 10,000 MW of new coal-fired power capacity to be installed, with commercial startup targeted over 2020-27.
The FEPC Chairman Makoto Yagi said the electric power industry in Japan was "facing a business environment of unprecedented difficulty."
"If the nuclear power plants remain shut for a long time and the finances of the power companies remain tight, they might have to take the tough decision to increase tariffs in spite of their utmost ... efforts," Yagi said.
S&P, like Platts, is a unit of McGraw-Hill Financial.
