Sun setting on coal titans’ export boom

Reduced demand from greener China will hit Australia, Indonesia, study says

Coal miners and logistics operators in Australia and Indonesia could see their export boom ending in the coming years as China, the world’s biggest market for coal, cuts its intake in order to meet decarbonization goals and reduce reliance on imports, according to a study.

In a research paper, economists from Australian National University forecast that China’s demand for coal imports will drop significantly by 2025 as the country seeks to cut emissions and also relies more on domestic supply to bolster energy security.

China — the world’s largest importer of coal for power generation and steelmaking — has announced a 2060 net-zero emission target and aims to peak carbon emissions by 2030, “which will inevitably reduce its consumption of coal”, the experts noted.

China is also building more transport infrastructure to get coal from domestic mines to its steel and power plants, to reduce dependency on coal imports.

These two factors are expected to reduce China’s imports of thermal coal, mostly from Indonesia and Australia, from 185 megatons (Mt) in 2019 to between 95 and 130 Mt by 2025, according to the researchers.

They said overseas imports of coking coal, mostly from Australia, are expected to fall from 34 Mt in 2019 to between 23 and 25 Mt by 2025.

“Chinese coal consumption affects seaborne imports much more strongly than domestic supply,” said the researchers, in a paper entitled “China’s decarbonization and energy security plans will reduce seaborne coal imports” that was published in the April 20 edition of the peerreviewed scientific journal Joule.

“Recent expansions of rail and port capacities, which reduce the costs of getting domestic coal to southern coastal provinces, will further reduce the demand for seaborne thermal coal and amplify the effect of decarbonization on coal imports.

“Seaborne coking coal imports are also likely to fall because of the expanded supply of cheap and highquality coking coal from neighboring Mongolia,” the study said.

Jorrit Gosens, energy economist with ANU’s Crawford School of Public Policy and lead author of the study, said the modelling shows major coal exporters like Australia would feel the biggest impact from China’s moves.

“Our findings are clear: Beijing’s plans for rapid decarbonization and energy security signal the end for Australia’s current coal export boon,” Gosens said in a statement.

“And this isn’t going to happen far off into the future; it is imminent. Our modelling predicts Chinese demand for Australian thermal coal will fall to between 30 and 40 megaton in 2025, down from about 50 megaton in 2019.

“When it comes to coking coal imports, Australia is the country that stands to lose the most. Australia’s coking coal exports to China are expected to fall to between 20 and 22 megaton, down from close to 30 megaton in 2019.”

According to the researchers, in normal years about a quarter of both Australia’s thermal and coking coal exports are destined for China.

Gosens warned that Australian businesses and political leaders can no longer rely on an increase in demand for Australian coal.

“Our results mostly show that China’s investments in coal transport infrastructure have greatly reduced the cost for China to cut imports, whether to impose punitive trade embargoes or to prop up domestic mining sector demand and employment,” he said.

“Even if Australia were to reconcile its current political differences with China, it should expect Chinese demand for its coal to be well below pre-conflict levels and to keep falling from that level.”

Gosens noted that China has been investing heavily in coal transport infrastructure for many years, precisely to reduce dependency on foreign energy.

“The recent turmoil in global energy markets will only strengthen Beijing’s resolve to decrease its dependency” on foreign supplies, he said.