Demand for coking coal will have increased by 115-million tons a year by 2015 as a result of increased consumption from Asia, predicts consulting engineering and project management company Hatch Africa director for coal Gerrit Lok.
He asserts that the global crude steel industry is growing at a compound annual growth rate (CAGR) of 5.2%, owing primarily to increases in demand from China and India.
In addition, forecasts suggest that demand for coking coal will continue to be driven by the Asia region, while supply will depend primarily on production from Australia and North America.
The bulk of global crude steel is produced through either blast furnace or basic oxygen furnace technologies, with blast furnace technology being the primary consumer of coking coal – it grew its market share from 58% to 73% between 2000 and 2010.
“As a key ingredient in the production of crude steel from blast furnaces, global coking coal production has grown by 5.5%, while coking coal consumption has, over the same period, increased by 5,1%. As a result, the overall production of coking coal is above the amount required to sustain the forecast demand,” explains Lok.
Indian coking coal imports are expected to increase to 43-million tons by 2015 from 30-million tons in 2010, as a result of the country’s increase in crude steel production.
Lok expects crude steel production in India to grow at a CAGR of 8.1%, resulting in the associated coking coal import demand growing at a CAGR of 7.5% between 2009 and 2015.
Meanwhile, Chinese coking coal imports are expected to increase; however, this will depend on crude steel production, domestic coking coal production and production costs.
“Chinese crude steel production has grown at a CAGR of 14.9% from 151.6-million tons in 2001 to 607.6-million tons in 2010, which is tremendous growth. However, it is [believed] that the intensity of crude steel production in China has peaked, and it is expected that steel consumption will increase at an average of 3% between 2010 and 2015,” explains Lok.
Lok believes that, globally, long-term growth in crude steel production looks promising owing to the expected production of an addi- tional 300-million tons of crude steel every year by 2015, which will increase the demand for coking coal.
“This increase in demand ultimately leads to the question of supply,” he says.
Lok says there is the possibility of a coking coal deficit from 2015 onwards, although the supply of coking coal should remain dependent on exports from Australia, with further export opportunities originating from Mozambique, Indonesia, Mongolia, Russia and North America.
“The seaborne export of coking coal will still depend on Australia. Despite this country being the biggest exporter of seaborne coking coal, with 64% of world exports, it is expected that its exports of coking coal will increase further to 192-million tons by 2015,” he points out.
He adds that there is the possibility of an increase in export levels from the US, considering the high cash cost of its mines, which could ultimately provide an incentive for the country’s mines to provide additional supply to seaborne markets as a result of the high spot price of coking coal.
In addition to Australia and the US, Mozam- bique, Mongolia and Indonesia are expected to bring an additional supply of coking coal to the market in the long term.
Mozambique, in particular, has ambitious plans to export more than 100-million tons a year, despite the country’s infrastructural bottlenecks which remain a problem.
“There is a disconnection between the pace of mine development and that of the infrastructure needed to transport the coking coal and export it. As a result, Mozambique remains a long-term solution to the tight coking market, with a likely potential for exporting 12-million tons a year of coking coal by 2015,” says Lok.
Mongolia has the potential to export 15-million tons a year of coking coal in the near future, although large-scale investment is needed to develop the country’s Tavan Tolgoi deposit as well as railway links.
“The Tavan Tolgoi deposit is one of the world’s largest undeveloped coking coal deposits, with an estimated reserve of 2.6-billion tons,” he says.
The annual output, which could reach up to five-million tons a year, would primarily target the Chinese market, and the deposit’s export potential will ultimately be determined by the rail links to China.
“According to a World Bank report, Tavan Tolgoi’s output would be sufficient to justify building a railway line into China. The cheapest route to export coal would be via the Chinese port of Huanghua, via Baotou, for about $56.5/t, while exporting via the Russian port of Vostochnoy would cost about $125/t,” Lok asserts.
He adds that, regardless of the routing, exports from Tavan Tolgoi will displace a percentage of the Australian exports to China.
Meanwhile, Russia has the potential to export coking coal from its Elga basin, but this depends on the extent of investment into its port infrastructure. Based on annual expansion plans by various companies, the country’s Pechora, Kuzbass and South Yakutsk basins hold the potential for exporting 24-million tons a year.
Looking ahead, Lok says that long-term coking coal demand remains positive, with premium coking coal prices holding steady.
He adds there might, however, be some short-term over- or undersupply conditions as a result of interim global economic uncertainties.
“The fundamentals of global population growth driving consumption, the renewal of old infrastructure in developed countries, and the establishment of new infrastructure in developing countries will drive the long-term demand for crude steel,” he concludes.
Source: Mining Weekly