Worldwide Coal Market Is Adjusting as China’s Appetite Slows

Chinese coal consumption is still on the rise, although a cooling rate of expansion is leaving producers with more than they can sell, said Ernie Thrasher, chief executive officer of XCoal Energy & Resources LLC.

The nation’s imports of the fuel have dropped 33 percent as of March compared with a year ago. Prices from the U.S. to Australia are trading at multiyear lows as the strong dollar has slowed efforts to stem a glut.

“The big challenges really are trying to get supply and demand rebalanced,” Thrasher said Thursday at the IHS CERAWeek Energy Conference in Houston. “Most of the growth in the world really came from the demand from China. As China makes an adjustment through its economic cycle, you’re starting to see that growth moderate.”

Demand growth for the world’s second-largest energy source, after crude oil, will increase by 2.1 percent a year through 2019, lower than the 3.3 percent annual pace in the first three years of this decade, the International Energy Agency forecast in its most recent Medium-Term Coal Market report.

China is the world’s largest coal consumer. Its thirst for coal is expected to decline 18 percent this year from 2013’s peak, Morgan Stanley said in an April 13 report.

Coal accounts for 40 percent of the world’s electricity, according to Paris-based IEA.

China Learning

China is still in the nascent stages of utilizing coal, Peabody Energy Corp. CEO Greg Boyce said at the conference.

The country added environmental controls to coal plants last year equivalent to America’s entire fleet, he said.

“They are behind, if you will, the development curve in how you use coal,” Boyce said.

Boyce is scheduled to step down from the St. Louis-based company next month. Peabody said earlier this week that he took a voluntary 10 percent pay cut as the U.S. coal industry navigates the dual challenges of cheap natural gas and tightening environmental regulations.

He said his company has been active in stating the case for coal before the United Nations Climate Change conference in November.

Before it's here, it's on the Bloomberg Terminal.