Analysis: China’s commitment to cut project finance is the ‘new normal’ for coal

A leaf sits on top of a pile of coal in Youngstown, Ohio, USA, September 30, 2020. REUTERS / Shannon Stapleton / File Photo

MELBOURNE / JAKARTA, Sept. 23 (Reuters) – Australia and Indonesia, the world’s largest coal exporters, face an accelerating decline in global demand for their coal shipments after China announced it would stop building coal-fired power plants abroad, analysts, environmental groups and industry officials said.

Chinese President Xi Jinping announced the move to the United Nations General Assembly on Tuesday, prompting environmental activists to predict a direct impact on major coal exporters. Read more

Beijing’s pledge is the latest blow for Australian and Indonesian coal miners as more energy systems around the world switch to renewables, however, Australian industry continues to push for a role for coal in the global energy mix.

“I think this is the new normal,” said Pandu Sjahrir, president of the Indonesian Coal Miners Association, when asked whether coal miners have to accept that global demand has peaked.

For more than a decade, Australia and Indonesia have been the world’s leading coal exporters, accounting for more than half of all coal shipments.

The two countries also export more coal than they consume, with Australia shipping over 75% of its coal, while Indonesia exports around 60% of production, according to the BP Statistical Review of World. Energy 2021.

Main consumers, exporters and importers of coal

GREATER DROP

Julien Vincent, executive director of the environmental group Market Forces, said: “The Australian coal industry is banking on increasing coal-fired power generation in developing countries to replace the long-term decline in demand in countries like Japan, South Korea and Taiwan.

Analysis by market forces shows that since the Paris Climate Agreement in 2015, the global coal-fired electricity development pipeline has fallen by 76%.

China’s statement will only accelerate this trend, Vincent said.

According to estimates from the Australian Department of Industry at the start of the year, coal exports continue to increase for both countries – to 213 million tonnes for Australia and 442 million tonnes for Indonesia from here 2023. read more

Longer term, consultants Wood Mackenzie said China’s pledge to stop funding new coal-fired power plants overseas puts 29 gigawatts of coal-fired power plants the company planned to build in Indonesia at risk. – beyond 2025, which could lead to an increase in coal exports from there. .

Rystad Energy consultants predict that global demand for coal will peak in 2024 at nearly 10,000 terrawatt hours (TWh). But the consulting firm also said it is expected to slightly revise its outlook to fall to 6,000 TWh by 2040 due to China’s decision to stop funding overseas coal-fired power plants.

“Following this announcement, the decline from 2025 will be slightly more pronounced than expected,” said Rystad vice president Xi Nan.

Global CO2 emissions vs coal use

ENERGY OPTIONS

Yancoal Australia Ltd (YAL.AX), Australia’s largest producer of pure coal and the leading exporter of thermal coal, said it expects continued demand for coal in Asia for the production of electricity and to make steel and concrete, and said its lenders and investors still view the business as a profitable business.

“Australia will continue to play a vital role as a primary source of premium metallurgical and thermal coal,” said a spokesperson for Yancoal.

Mining groups Whitehaven Coal (WHC.AX) and New Hope Corp (NHC.AX) declined to comment.

The Minerals Council of Australia (MCA) said governments and industry in Asia should step up efforts to reduce emissions through measures such as carbon capture and storage at existing factories.

“This is what is needed both to reduce emissions and continue to offer countries a full range of energy options for their development,” said MCA Managing Director Tania Constable.

Reporting by Melanie Burton in Melbourne and Fransiska Nangoy in Jakarta; Additional reporting by Sonali Paul in Melbourne and Mai Nguyen in Hanoi; edited by Gavin Maguire and Jane Merriman

Our Standards: Thomson Reuters Trust Principles.

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