Commodities

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Which country was the world's biggest coal importer in 2015?

If you're tempted to believe it's dirty old China, think again. Japan -- home of the Toyota Prius and the world's largest floating solar-power farm -- shipped more coal than its neighbor across the East China Sea in 14 out of the past 24 months.

Big in Japan
Japan has been a bigger coal importer than China in 14 out of the past 24 months
Sourec: Bloomberg

The country's shutdown of its atomic-power industry following the 2011 Tohoku earthquake and Fukushima Daiichi nuclear accident left it scrambling for alternative sources of electricity and as a result, consumption of coal, oil and gas soared.

While Japan has been ramping up installations of renewable energy, its fleet of mothballed nuclear power stations represent low-hanging fruit in any attempt to reduce dependence on these imported fossil fuels. But predictions of a restart have been confounded so many times over the past six years that many people appear to assume it will never happen.

Switching On
Japan is going to generate more nuclear power in 2017 than in any year since the Tohoku earthquake
Source: International Energy Agency, Institute of Energy Economics, Japan
Note: Historic figures from IEA; forecasts from IEEJ.

That could prove a costly mistake. Restarts will finally get going in earnest this year, driving generation to somewhere between 27 terawatt-hours and 89 terawatt-hours, according to a study last month by the Institute for Energy Economics, Japan, a government-run think tank. At the high end, that would result in nuclear rising from zero percent of the country's energy mix in 2014 to almost 11 percent in 2017.

The effect on energy markets could be dramatic. As well as being one of the world's biggest coal importers, Japan consumes about a third of the world's supply of liquefied natural gas. The post-Fukushima nuclear shutdown helped drive Japan's LNG import prices to record levels in 2012. The reverse scenario would weigh further on an already depressed market.

Gas Rises
The 2011 Tohoku earthquake helped drive Japanese import prices for LNG to a record
Source: LNG Japan Corp., Bloomberg

Japan's oversupply of imported gas is growing so significant that there's a chance the entire global LNG trade, which is dominated by direct contracts between producers and utilities, could head the way the oil market went in the 1970s and turn into a liquid secondary market where traders take pricing risk from both sides.

By 2020, between 10 percent and 20 percent of purchases by the country's biggest gas buyer, Jera Co., could be free of clauses restricting its resale, Senior Executive Vice President Hiroki Sato told Bloomberg's Stephen Stapczynski and Tsuyoshi Inajima last month.

A nuclear restart would add fuel to that fire. Japan is already contracted to buy 20 million tons more than it needs by 2020, according to Bloomberg New Energy Finance. Should the country follow through on the IEEJ's high scenario, an extra 3 million tons will be added to that total in 2017 alone.

Japan's nuclear industry isn't popular with residents, and spanners have been thrown in the works of restarts before. Four reactors at Kansai Electric Power Co.'s Takahama and Ohi plants, with a combined generation capacity of about 3.9 gigawatts, are all out of action despite passing regulatory tests after local courts shut them down.

Even so, there are significant benefits from a return to atomic power. It should lower the cost of electricity, reduce fossil-fuel emissions, decrease import dependency and lift gross domestic product, according to the IEEJ.

Glowing Performance
Uranium prices are up 30 percent after reaching a record low at the end of November
Source: Bloomberg

That's bad news for fossil-fuel producers, who could see the glut in the Pacific gas trade accelerate while the remaining tightness in the region's coal market is wiped out. Uranium prices, on the other hand, are up 29 percent since touching a record-low $17.75 a pound in November. The world's worst commodity could be on the brink of a reprieve.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The high scenario for nuclear restarts that IEEJ predicted in December, which would see 18 nuclear plants restarted by the end of this year, is lower than the central scenario in its previous forecast last July, which saw 19 nuclear plants in operation.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net