Chinese Coal Demand

U.S. Demand Drops, Chinese Demand Grows


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The largest source of recoverable coal lies in the United States. For over 60 years, according to the EIA, it’s been the most-used fuel for electricity in the U.S. In 2007, coal-fired electricity generation for the U.S. was at 49 percent.

But by 2011 it had dropped to 42 percent.

All indications show the pendulum is beginning to swing away from coal, and there’s no doubt that cleaner, cheaper natural gas is replacing it. Still, coal is an inexpensive fuel—less expensive than natural gas until quite recently.

It wasn’t until technological breakthroughs made natural gas more accessible that it became a viable and reliable option as an energy source.

One clear indication of the trend away from the use of coal is a shift in rail traffic. 2012 saw a record increase in U.S. crude oil shipments by rail and a tremendous drop in coal rail shipments. And the correlation was direct, as an EIA report showed.

A huge portion of the coal delivered to power plants—70 percent—is delivered by rail. But because those same power plants are turning to natural gas to generate electricity, the demand for coal is decreasing, and thus deliveries by rail fell in 2012 as a result.

From the EIA report:

Coal accounted for 37.2% of U.S. electricity generation through November 2012, based on the latest data from EIA's Electric Power Monthly. That level is down from 42.5% during the same 11-month period in 2011. Electricity generation from natural gas increased from 24.6% to 30.8% over the same time.

There are clear indications that there is a changing of the guard in U.S. energy use, but coal is still one of the U.S.’s most precious resources.

And while the domestic use of coal is going down, the demand throughout the world—especially in China—continues to increase.

Marketwire found:

The EIA reported that China's coal consumption increased 9 percent to 3.8 billion metric tons in 2011, which was its 12th consecutive yearly increase. China now accounts for approximately 47 percent of global coal consumption. The EIA has stated that China has accounted for 82 percent of the growth in coal demand since 2000. According to the International Energy Agency, China was not only the largest coal producer in 2011, accounting for roughly 46 percent of global production, but also the largest importer, importing approximately 177 million metric tons in 2011.

That is great news for a U.S. market that growing is less reliant on the use of coal but still capable of producing the commodity at an astounding rate.

China has coal resources in abundance, but demand is exceedingly high. There can also be a problem with transportation and distance to load centers—an issue of imports will lessen.

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China has also begun to close some of its domestic mines due to safety issues, as Bloomberg reports. In 2011, 1,973 people were killed in Chinese mines due to accidents. A year earlier, the State Administration of Work Safety reported a staggering 2,433. In the U.S., the numbers don’t even compare—48 deaths in 2010.

The number of deaths to mine workers, and the threat of working under hazardous conditions, directly impeded production at many Chinese plants and cuts off supply lines; roughly 5,000 mines are to be shut down, reports Bloomberg.

The amount of energy that China consumes as a nation, and the unfortunate accidents that have caused many mines and coal production operations to shut down for good, means the nation is going to have to get their coal from somewhere.

And one of the world's major coal producers begins to produce less and less, it leaves the door wide open for the U.S. to step in and fill that gap.

The plan for coal may not be what it once was, but as China continues to expand alongside other developing nations around the world, it may be the U.S. that supplies the demand for coal.

 


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