China will widen its gap with the United States as the world's largest coal-producing country by the end of the decade, riding continued strong demand from its electric power and steel-making sectors, according to a new analysis from New York-based GBI Research.
By 2020, the report projects China will produce 4.5 billion metric tons of coal annually, reflecting a 3.5 percent compounded annual growth rate over the next eight years.
Regionwide, coal consumption for the power generation in Asia stood at an estimated 2.7 billion metric tons in 2011. From 2012 to 2020, that figure is expected to rise to 4.4 billion tons annually, according to GBI.
The Asian forecast contrasts sharply to projections for the United States, which is expected to see sagging domestic demand as power plants undergo fuel switching away from coal. Questions remain as to whether American exports of domestic coal can make up the difference.
The United States produced nearly 1.1 billion tons of coal in 2011, according to the U.S. Energy Information Administration, a 10 million-ton increase over 2010's output but still shy of the recent high set in 2008. Meanwhile, exports of U.S. coal jumped 31 percent from 2010 to 2011, from 81.7 million tons to 107.2 million tons, according to EIA.
Within the Asia-Pacific region, China continued to outpace its neighbors with 3.3 billion metric tons of coal produced in 2011, accounting for a 68 percent share of all production in the region. China's mines are expected to maintain high production rates through 2020, with abundant reserves in the provinces of Inner Mongolia, Shanxi, Shandong, Xinjiang, Qinghai, Gansu and Ningxia, the analysis found.
According to GBI, China's increase in coal production will come with additional government consolidation of the mining industry into large production bases that can achieve greater efficiencies and production capacities of 90 percent by mid-decade.
"The increase in domestic coal consumption is driven by huge demand from existing and upcoming coal-fired power plants," the report said. Power plants currently account for more than 55 percent of all coal consumed in China, with the rest going to other industrial users such as steel mills and cement plants. As domestic demand increases for both thermal and metallurgical coal, China is expected to curtail exports, possibly expanding markets for other regional players like India, Australia and Indonesia.
India, Indonesia also see rising production
GBI projects that India, currently the world's third-largest coal producer, will also see a surge in production -- on the order of 6.8 percent annually -- because of the country's heavy reliance on coal-fired electricity along with expanding steel, cement and fertilizer manufacturing sectors.
By 2020, India is projected to produce 1.1 billion tons of coal annually, up from 632 million tons in 2011. Such robust growth would place India on par with the United States in terms of total production, assuming international markets for U.S. coal remain strong.
"India is a power-deficit country," the report notes. As such, its national government has sought to build an additional 100,000 megawatts of new electricity generation in the coming years. "The majority of the capacity addition will be through thermal power plants, for which the demand of coal is going to increase in the future," the report said. India imports coal from Indonesia, Australia and South Africa to make up for a shortfall in domestic supplies.
Indonesia, while a smaller producer than China or India at 352 million metric tons of coal in 2011, has witnessed a quadrupling of its production rate since 2000 as it has helped meet demand for thermal coal in Japan, Taiwan, Hong Kong, India, China and other areas.
Indonesia has key advantages for exporting its coal because of the proximity of its two primary coal-producing islands -- Kalimantan and Sumatra -- to seaports and navigable rivers, reducing transport time and cost for importing countries, GBI noted.