© OECD/IEA 2016

IEA’s Medium Term Coal Market Report 2016

© OECD/IEA 2016

Coal markets: recent developments

Global coal demand declined in 2015 for the first time in this century

Coal demand drop in China and US in 2015 was unprecedented

China’s coal demand declined in 2015 for the second year in a row

Last time this happened was 1981. Economic restructuring and energy diversification underpinned such decline

International coal trade shrank in 2015 for the first time in 20 years

There is none to offset declines in Europe, India and especially China

India, Australia and Russia increased production significantly in 2015

Despite low prices, cost reduction in Australia and Russia, and increasing demand in India were drivers for production ramp up

Coal prices ramped up in 2016 to unexpected levels one year ago

Chinese supply side policy changes was the main driver, exacerbated by disruption in Australia and other places

© OECD/IEA 2016

Coal consumption has decreased in North America and Europe while increasing strongly in Asia

The coal world is becoming completely asymmetrical

25%

22%

46%

4%

2%

1%

20002015

1%

12%

3%

10%

73%

The shift of coal to Asia is accelerating

© OECD/IEA 2016

High prices, but low expectations

Thermal coal prices doubled mostly pushed by Chinese supply cut, but the market players expect the trend to reverse

Price of thermal coal

0

10

20

30

40

50

60

70

80

90

100

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Sep

-16

Jan

-17

May

-17

Sep

-17

Jan

-18

May

-18

Sep

-18

Jan

-19

May

-19

Sep

-19

Jan

-20

May

-20

Sep

-20

$/t

© OECD/IEA 2016

Does China set the global prices?

The large arbitrage in the southern import ports between domestic and imported coal is key to determines prices – in China and elsewhere

Domestic coal from northern ports

Imports

Imports

Net outbound

Net inbound

© OECD/IEA 2016

Global coal demand: from growth to plateau

Largest growth will be in India and ASEAN region Largest decline will be in US and Europe Largest uncertainty is China

0

1000

2000

3000

4000

5000

6000

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Mtc

e

China

IndiaSoutheast AsiaUnited StatesEuropean Union

India

Southeast Asia

United States

China

European Union

Rest of world

Historical and forecast coal demand by region

© OECD/IEA 2016

Coal consumption in China in the future: a flat trajectory

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Mtce

Cement

Steel

Electricity

NuclearHydroSolar+Wind

Demand forecast

Demand without

rebalancing

Rebalancing of the economy and the increasing share of generation from hydro, nuclear and other renewables flatten the projection

Impact of diversification and economic rebalancing on Chinese coal demand

© OECD/IEA 2016

Who is hitting US coal?

Coal power generation has largely been replaced by gas generation But energy efficiency and wind were also significant

- 800

- 700

- 600

- 500

- 400

- 300

- 200

- 100

0

Coal DemandOil,

Hydro,

Nuclear

Wind Solar Natural Gas

TWh

2006–2015 change in power generation in the US

© OECD/IEA 2016

China: giving access to electricity

After successful electrification at home, Chinese companies are building new coal-fired power plants in numerous countries.

Countries where coal plants have been announced or built by Chinese companies

© OECD/IEA 2016

Coal trade forecast: all eyes on China and India

Coal trade is forecast to recover by the end of the outlook period Imports to China and India will remain volatile and hard to predict

Coal imports to selected countries

0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Mt

Viet Nam France Japan India China

© OECD/IEA 2016

CCS: few steps, no strides.

Despite concrete progress on CCS, only 0.06% of coal-based CO2 emissions are captured

Strong action from governments is urgently needed

Kemper County3 Mt CO2

Petra Nova1.4 Mt CO2

Boundary Dam1 Mt CO2

Great Plains Synfuel3 Mt CO2

Coal related CO2 emissions in 2015: 14 000 Mt

Large-scale coal-based CCUS projects in the world

© OECD/IEA 2016

Coal markets: the outlook Global demand growth to stall in the next coming years

With decline in Europe and US almost offsetting increase in India and ASEAN region, China will determine the global trends

In China, coal demand is in structural and slow decline driven by a new economic growth model and diversification from coal However, dependence on coal of China will remain and demand in

2021 is forecast higher than in 2015

Coal trade contracts, but recovers at the end of the outlook period Viet Nam, Malaysia, Pakistan, Philippines, Morocco and other

importers add up to increase coal trade

Coal prices have strongly rebounded up in 2016. As a result, the coal industry has found some relief Looking ahead, low costs, slugging demand and structural

oversupply in China do not support high prices

Despite concrete progress, CCS development requires stronger support and commitment by governments Without CCS deployment, coal’s future is seriously challenged, but

also our climate targets

© OECD/IEA 2016

Medium Term Coal Market Report 2016

Questions are welcome, please addressed to:

Carlos.Fernandez@iea.org