Archive for 2.2 Domestic Consumption and International Commerce

Understanding China’s Rising Coal Imports

Over the past decade, China’s domestic coal output has more than doubled while its coal imports have increased by a factor of 60—the country’s dependence on other nations’ coal exports is growing. In 2009, the global coal market witnessed a dramatic realignment as China burst onto the scene, importing coal from as far away as Colombia and the United States. With 182 million tons (Mt) of coal sourced from overseas suppliers in 2011, China has overtaken Japan as the world’s top coal importer. Moreover, as the world’s top coal consumer, China’s imports could rise significantly again by 2015.

2 Coal, 2.2 Domestic Consumption and International Commerce

Remaking the World’s Largest Coal Market: The Quest to Develop Large Coal-Power Bases in China

China’s coal market is now in the midst of a radical restructuring that has the potential to change how coal is produced, traded and consumed both in China and the rest of the world.  The restructuring aims to integrate the coal and power sectors at giant “coal-power bases” that combined would churn out more coal annually than all the coal produced in the entire United States. Coal-power integration is now a focal point of the Chinese government’s energy policy, driven by the dramatic “coal-power conflict”.  Coal prices are market-based, but power prices are tightly controlled by the government.  This has caused massive losses for Chinese power generators in 2008 and 2010 and triggered government intervention in the coal market with attempts to cap the price of coal.  The pervasive conflict between coal and power is now driving the Chinese government to remake these markets. Coal-power base policy aims to establish upwards of 14 major coal-power bases, each producing over 100 mt of coal with consuming industries on-site.  The plan envisions that roughly half of China’s coal production would be produced at a handful major coal-power base sites that are controlled by key state-owned enterprises (SOEs) and the central government.    PESD’s new research analyzes China’s coal-power base reforms and how they will impact Chinese and global coal markets.

2 Coal, 2.2 Domestic Consumption and International Commerce

The World’s Greatest Coal Arbitrage: China’s Coal Import Behavior and Implications for the Global Coal Market

In 2009 the global coal market witnessed one of the most dramatic realignments it has ever seen – China, long a net exporter of coal, suddenly imported a record-smashing 126 Mt tons (103 Mt net). This inversion of China’s role in global coal markets meant that Chinese imports accounted for nearly 15% of all globally traded coal, and China became the focal point of global demand as traditional import markets like Europe and Japan stagnated in the wake of the financial crisis.  The middle kingdom’s appetite for imported coal seems insatiable, and the “China Factor” appears to have ushered in a new paradigm for the global coal market. But China doesn’t “need” the coal.  The world’s largest coal producer cranked out 2.96 Bt of production in 2009, backed up by 114.5 Bt of reserves.  While the world’s other fastest growing importer, India, is plagued by a growing gap between coal supply and power demand that it is unable to fill domestically, this is not the case in China.  The spike in Chinese demand for imported coal is therefore a more complex (and less easily predictable) phenomenon that requires careful examination if the world is to understand what impact China might have on global energy markets in the coming decade. In this paper Richard Morse and Gang He devise a model that explains Chinese coal import patterns and that can allow the coal market to understand, and to some degree predict, China’s coal import behavior.  They argue that the unique structure of the Chinese coal market creates a series of key arbitrage relationships between Chinese domestic coal markets and international coal markets that determine Chinese import patterns.

2 Coal, 2.2 Domestic Consumption and International Commerce

Trends of Import and Export of Coal by China and its Influence on Asian Market

China exported over 90 million tons of coal in 2001 to play an important role as supplier of coal to Asian coal markets, especially the East Asian region. However, China’s coal exports have decreased every year since 2004, whereas its imports have risen, reflecting a tightening of its domestic supply and demand due to a sharp increase in domestic consumption since 2003. This decrease in export and increase in import remarkably influenced the supply and demand of coal in the Asian coal markets and became one of the factors for the price rise in 2007 and after. This report traces China’s exports and imports of coal and the influence it has exerted on Asian coal markets and forecasts future trends in China’s exports and imports in order to assess the resulting impact on Asian markets

2 Coal, 2.2 Domestic Consumption and International Commerce

Coal Supply Challenges for China

2 Coal, 2.2 Domestic Consumption and International Commerce

Baseline for Carbon Emissions in the Indian and Chinese Power Sectors: Implications for International Carbon Trading

The study examines the dynamics of carbon emissions baselines of electricity generation in Indian states and Chinese provinces in the backdrop of ongoing electricity sector reforms in these countries. Two Indian states-Gujarat and Andhra Pradesh, and three Chinese provinces-Guangdong, Liaoning and Hubei have been chosen for detailed analysis to bring out regional variations that are not captured in aggregate country studies. The study finds that fuel mix is the main driver behind the trends exhibited by the carbon baselines in these five cases. The cases confirm that opportunities exist in the Indian and Chinese electricity sectors to lower carbon intensity mainly in the substitution of other fuels for coal and, to a lesser extent, adoption of more efficient and advanced coal-fired generation technology. Overall, the findings suggest that the electricity sectors in India and China are becoming friendlier to the global environment. Disaggregated analysis, detailed and careful industry analysis is essential to establishing a power sector carbon emissions baseline as a reference for CDM crediting. However, considering all the difficulties associated with the baseline issue, our case studies demonstrate that there is merit in examining alternate approaches that rely on more aggregated baselines. Program on Energy and Sustainable Development Working Paper #34, published by Energy Policy.

2 Coal, 2.2 Domestic Consumption and International Commerce

Prospects for the Supply and Demand of Coal and Related Coal Transportation Issues in China

In 2002, China produced 1,390 million tonnes, exported 85 million tonnes, imported 11 million tonnes, and consumed 1,280 million tonnes of coal. The Asian coal market must be seriously affected, and Japan’s stable supply of coal will be severely damaged, if China’s supply and demand status in relation to coal collapses or narrows. In general, the greatest portion of China’s coal reserves is to be found in the northern and western regions, while the areas of demand are primarily located in the eastern and southern regions. Although coal is produced widely in the while country, Shanxi Province is the center of coal production in China, and transports about 200 million tonnes of coal to the areas in demand. Sanxi region (Shanxi Province, Shaanxi Province, and the western part of Inner Mongolia Autonomous Region) is expected to constitute a major supply center for coal in China and the transportation of coal from this region will be a key for the stable supply of coal within the country.  This report reviews China’s prospects for the supply and demand of coal up to 2020 and examines how the transportation of coal from Sanxi region (China’s major coal supply center) will be developed.

2 Coal, 2.2 Domestic Consumption and International Commerce

Impact of WTO Entry on the International Trade of Coal

This article reviews the Chinese international coal trade activity in recent years, with a focus on the steam coal market. It then goes on to summarize market factors which will gain importance as China is integrated into the WTO. It examines the current state of information available at the time of writing, in order to analyze China’s practices in the international steam coal sector. It ends with speculation on “the way forward” for Chinese international coal trade. Written 10 years ago, as China was entering the WTO, this article offers important background to understanding the current situation in the Chinese coal sector, and its impact on global coal trade.

2 Coal, 2.2 Domestic Consumption and International Commerce

Coal Pricing in China: Issues and Reform Strategy

This study makes an important contribution to our understanding of the magnitude of coal price distortions producers and consumers face in China and how the distortions ripple through the Chinese economy. China has already made an impressive start on reforming its economy. The question of price distortions must now be faced and addressed in order to move the economy to a higher plane of development and efficiency. The author outlines a strategy for gradual price adjustments and liberalization in the coal sector.

2 Coal, 2.2 Domestic Consumption and International Commerce