Coal-fired power is expected to retain competitiveness in India for a long time because of the relatively young age of the coal fleet of around 10 years on average, or one-quarter of a normal lifetime, says BHP in its Economic and Commodity Outlook for first half of FY2021.
Globally, the energy major believes total primary energy derived from coal (power and non–power) to expand at a compound rate slower than that of global population growth.
“Coal power is expected to progressively lose competitiveness to renewables on a new build basis in the developed world and in China. On a conservative estimate, the cross-over point should have occurred in each of these major markets by the end of this decade,” BHP said.
Despite late improvement in prices, calendar 2020 will go down as a very challenging one for the coal industry, says BHP.
Seaborne imports declined by around -68 million tons (-6.8 percent) from the calendar 2019 level. While China and Vietnam saw import volumes grow in calendar 2020, Japan, South Korea and India saw their collective imports fall.
This placed considerable pressure on exporters.
With more than half of seaborne supply earning negative margins, major regions responded with lower shipments, with Australia (-12 mt), Colombia (-21 mt) and Indonesia (-56 Mt) absorbing much of that burden, although COVID-19, wet weather and infrastructure issues were arguably as important as discretionary economic curtailments.
Energy coal prices were weak for much of the first half of financial year 2021, before rallying late in the period on strong winter power demand from North Asia.
The gCNewc 6000 kcal/kg FOB Newcastle index averaged around $59/ton over the first half of financial 2021, down from around $62/ton in the prior half.
Prices ranged from a high of around $85/ ton to a low of around $48/ton, with the high achieved in the final trading week of the second half of December.
The low point of $48/ton is below the 2015-16 trough in real terms.
“Based on the Wood Mackenzie operating cost curve, more than half of seaborne supply (comprising all grades of energy coal) was likely experiencing negative margins with 6000 kcal prices in the high $40s or low $50s,” the report said.
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