China and India?s unabated demand will shift global thermal coal trade: Wood Mackenzie

(Edinburgh/annapolis, 19th October 2010) ? Jeff Watkins, Chairman for Coal at Wood Mackenzie, addressed delegates at Coaltrans World in Amsterdam today forecasting two significant shifts in the world?s thermal coal imports in the next five years. Charting Pacific basin thermal import coal demand, Watkins demonstrated how unabated economic growth will lead to the first dramatic shift around 2011 when China will overtake Japan as the world?s largest thermal coal importer. The second shift is set to occur around 2019 when demand for imported thermal coal from India will supplant China at 182 Million tonnes (Mt), versus 178 Mt for China that year.

Mr Watkins told the audience, ?The global coal trade will grow significantly during the next few decades, with total thermal seaborne coal demand set to increase from 680 Mt to 1,187Mt between 2010 and 2025. However this is a growth story concentrated in the Pacific basic, driven by continued economic development in some of the world?s largest economies. In fact, nearly all major coal-consuming countries in Asia are expected to experience significant demand growth with the notable exception being Japan.?

?It has been well documented that China and India?s economies have been relatively unscathed by the economic turmoil that developed economies have faced. China?s GDP has surpassed Japan?s making it the world?s second largest economy after the US and we predict that this will be reflected in the country?s coal demand. We forecast that in 2011, total thermal coal imports for China will reach 122 Mt, compared to a forecast of 120 Mt the same year in Japan,? Watkins stated.

In India, the country?s appetite for power generation versus insufficient domestic supply will drive its need for coal imports, Wood Mackenzie expects thermal coal demand in India to increase by 810 Mt, or 137%, by 2025 driven by a 158% increase in coal-fired power capacity. But contradicting historic supply flows in the region Watkins said it?s not just Indonesia that stands to reap the benefit of this changing demand, ?While Indonesia will continue to be a key supplier of thermal coal to India, South Africa is best placed to provide additional supply, particularly given continued weak demand in its traditional export market in Europe.?

With thermal coal exports from Colombia and South Africa competing for supply to India and China, against the backdrop of long-term depressed thermal coal demand from developed economies in the US and Europe, Mr Watkins warned that Asia Pacific basin suppliers including Australia and Indonesia will require significant investment in order to continue increasing exports, posing the question of whether infrastructure expansions in Australia and South Africa will keep pace with increasing demand.

Citing PWCS in Newcastle, Australia as an example, Mr Watkins said, ?Although nameplate capacity at the port is 113 Mt, shipments for 2010 are forecast to be around 97Mt ? significantly under the 107Mt of orders they have. Newcastle is underperforming due to a continued lack of port and rail infrastructure and this issue will need to be addressed, particularly if Australia is to step up to meet China?s increased demand in the medium term.? (ends)