Imported Thermal Coal - Commodities Info

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Major Characteristics

• Coal, a fossil fuel is a readily combustible black or brownish-black sedimentary rock normally occurring in rock strata in layers or veins called coal beds. It is composed primarily of carbon along with variable quantities of other elements, chiefly sulfur, hydrogen, oxygen and nitrogen. Coal is extracted from the ground by mining, either underground or in open pits.
• The degree of change undergone by a coal as it matures from peat to anthracite is known as coalification. Coalification has an important bearing on coal's physical and chemical properties and is referred to as the 'rank' of the coal.
• Low rank coals comprising of lignite or brown coal (17%) and sub-bituminous coal (30%) account for 47% of total global coal reserves. While lignite is largely used for power generation, sub-bituminous coal is used for electricity generation, cement manufacture and by industry.
• Hard coal (53%) includes bituminous coal (52%) and anthracite (1%). Bituminous coal is further classified into thermal / steam coal and metallurgical / coking coal. Thermal coal is used for power generation, cement manufacture and has industrial applications. Coking coal is used largely for manufacture of iron and steel. Anthracite has both domestic and industrial uses.

Global Scenario

• Coal reserves are available in almost every country worldwide, with recoverable reserves in around 70 countries. Global proven coal reserves are estimated to last for 122 years at current production levels, as against 42 and 60 years respectively for proven oil and gas reserves.
• The total global proven reserves are estimated to be around 910 billion tonnes, with USA (27%), Russia (17%), China (13%), India (10%) and Australia (9%) holding major share of the reserves.
• Global hard coal and brown coal (lignite) production is estimated at 5845 million tonnes (m.t.) and 951 million tonnes in 2008 respectively.
• China (2761 m.t.), USA (1007 m.t.), India (490 m.t.), Australia (325 m.t.), Russia (247 m.t.) and Indonesia (246 m.t.) are the major global coal producers. The top three producers account for 73% of the total production.
• Global hard coal consumption is estimated at 5814 m.t. in 2008. The economic progress of the world, especially in the emerging countries has lead to consumption sharply increasing by around 65% from levels of around 3500 m.t. in 1990's. China, alone accounts for 46% of the global hard coal consumption.
• Coal provides 26.5% of global primary energy needs and generates 41.5% of the world's electricity. The countries heavily dependent on coal for electricity generation include South Africa (94%), China (81%), Australia (76%), India (68%) and USA (49%).
• Steel industry is estimated to use approximately 13% (around 717 m.t.) of total hard coal production and almost 70% of total global steel production is dependent on coal.
• The global hard coal trade in 2008 is estimated to be around 938 m.t., with total trade in thermal coal estimated to be 676 m.t. The major global exporters of thermal coal in 2008 are Indonesia (173 m.t.), Australia (115 m.t.), Russia (86 m.t.) and Columbia (74 m.t.). The major global importers of thermal coal in 2008 are Japan (128 m.t.), Korea (76 m.t.), Chinese Taipei (60 m.t.).

World Thermal Coal Markets

• Intercontinental Exchange (ICE), which offers European and South African coal contracts, runs the world’s most liquid coal derivative market. Coal futures are also traded on Chicago Mercantile Exchange, which has acquired NYMEX.

Indian Scenario

• Coal is the most important and abundant fossil fuel in India and it meets 55% of the country's energy need. It is estimated that about 75% of total coal consumed in the country and 80% of the domestic production is used for power generation
• India is the world's third largest coal producer with production of around 493 million tonnes in 2008-09.
• India's hard coal reserves are estimated to be around 246 billion tonnes, of which 92 billion tonnes are proven. Hard coal deposits of 56 billion tonnes are spread over 27 major coalfields, mainly confined to eastern and south central parts of the country. The lignite reserves stand at a level around 36 billion tonnes, of which 90 % occur in Tamil Nadu.
• India's total imports of hard coal in 2008 is estimated to be 60 million tonnes (m.t.), of which 31 million tonnes is of thermal coal and 29 million tonnes is of coking coal. The imports of thermal coal has increased substantially from 10.31 m.t. in 2002-03 to 23 m.t. in 2006-07 and to 28.9 m.t. in 2007-08. The import requirements are projected to growth further to over 40 m.t. in coming years.
• Despite, India's vast coal reserves the country has become more dependent on imports of thermal coal over the recent years. The poor quality of indigenous coal supplies, logistics problems and lowering of import duty has made imports a preferred choice for cement manufacturers, some other industries, power plants, along the southern and western coasts.

Market Influencing Factors

• Coal demand is highly dependent on energy demand, as it is the major source for power generation in many countries.
• Significant demand from China and India is increasingly accounting for the bulk of worldwide coal usage. Hence, coal demand and consequently coal prices are dependent on the economic scenario in the emerging markets, particularly China and India
• Coal prices are influenced by the price scenario in other fossil fuels used for energy generation, viz., oil and gas as if these become expensive, demand will increase for coal and cause rise in its prices too.
• Despite, coal being a finite resource, supply is not an issue in the medium term as global reserves are still large, and technologies for the extraction and utilisation of coal are improving.
• As coal is a globally traded commodity, its prices are influenced by macro-economic factors like global economic scenario, currency fluctuations, geo-political tensions, interest rates, prices of other assets, commodities etc.

Measurements

• 1 Metric ton = 1 Tonne = 1000 kilograms
• 1 Short ton = 907.184 kilograms
• 1 Long ton = 1016.046 kilograms

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