Our top takeaways from the Coal Forum 2023
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Vice President, Metals and Mining Research
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Thermal coal demand is set for a long-term downward trend. By 2050, we forecast that there will be a 60% fall in traded thermal coal. But the global road to decarbonisation will not be a smooth one, and energy security and affordability concerns have slowed the decline in coal demand in the short term.
As the industry navigates the transition to a carbon-free world, we gathered with industry leaders to reflect on the long-term outlook for thermal and metallurgical coal, power markets, steel and hydrogen at our Coal and the Future of Energy Forum in Brisbane.
Will low-carbon solutions accelerate the replacement of coal or help to secure its legacy? What will influence the pace of change?
Our latest insight, ‘Things we learned from Brisbane’s Coal Forum 2023’, reflects on these hot topics and more. Fill in the form on the page to download your complimentary copy, or read on for a summary of some our top takeaways.
1. Expect the energy transition to be volatile, even chaotic
Energy security and affordability concerns have slowed the decline in coal demand, particularly in Asia. In the wake of last year’s energy crisis, many markets put on hold their plans to phase out coal, and power system investment plans around Asia include a healthy share of coal generation this decade.
The energy transition will be volatile, and it will not be uniform. There will be ebbs and flows depending on the pace of renewables penetration, technology advances and economic growth across different regions. We should continue to expect periods of emissions growth, even after the global peak is reached. Coal will continue to play a role over the coming decades, but predicting the trajectory of diminishing demand is extremely difficult in the absence of firm global agreements on its use.
2. Regulation is making a poor Investment outlook for coal worse
Regulatory uncertainty in Australia is reducing the attractiveness of coal investments. Price caps, royalty hikes, reservation policies, the safeguard mechanism and ‘same job, same pay’ legislation will all be negative for asset values. There are still pockets of investor capital available for coal, but the pool is shrinking, and greenfield thermal coal investments just look too hard, if not yet impossible.
Alongside this, the magnitude of investor interest in renewables should not be underestimated. Policy support in the US and EU is marshalling huge amounts of capital into clean energy in those regions. The experience of Australian generators has shown that investor interest will also explode locally if conditions are right.
3. Emissions reduction and automation likely to transform the face of mining
In efforts to secure their licence to operate, Australia’s coal miners are focusing on an array of new decarbonisation initiatives, from replacing traditional explosives with hydrogen peroxide alternatives to introducing autonomous trucks. Biogas, bio-diesel and on-site coal seam gas fuels are all on trial, as are battery recharge options including mobile induction and traditional trolley systems. A shift to using a larger number of smaller-scale trucks is a real possibility, made possible by reduced safety requirements for autonomous vehicles, and limits on battery sizes.
But the biggest challenge will be reducing coal seam methane emissions, which account for more than 90% of the total scope 1 and 2 category at underground coal mines. Harder still will be tackling scope 3 emissions, as the vast majority of these sit with downstream producers, over which miners have little or no control.
4. China or India? Who will set future met coal prices?
China’s structural decline in steelmaking is inevitable. As a result, we expect there to be a 50 Mt drop in demand for met coal by 2030, increasing to 345 Mt by 2050.
But Indian mills could pick up where Chinese demand drops off. India has already taken on the role of clearing house for premium seaborne met coal since China’s ban on Australian coal in November 2020. The competition between China and India for pricing supremacy will be a defining factor for metallurgical coal markets given the completely polarised trajectories of those two steel markets.
5. Wide scale hydrogen use in steel is a long way off
Improvements in steelmaking efficiencies will reduce demand for met coal in the near and mid-term, and scrap – not hydrogen – will be enemy number one for metallurgical coal demand. Technology costs, including for green hydrogen-based steel making, remain the main barrier to widescale replacement of coke in steelmaking.
The use of hydrogen-based technologies at scale is a long way off for Asian economies. Supply of green hydrogen will grow but, given the complexity of replacing the swathes of relatively young incumbent blast furnace facilities, the process is likely to be very slow. We forecast hydrogen adoption in steelmaking will pick up pace after 2035, but without major shifts in technology costs, adoption will remain difficult
6. Australia is positioning itself as a major supply hub for green hydrogen, but difficult questions remain
Cheap renewables and ample land will make Australian hydrogen cost competitive, and therefore attractive for the nascent green hydrogen industry.
However, the high costs associated with exports is leading to a consensus that hydrogen should be best used where it is produced. Currently, there are no government initiatives to incentivise local use in Australia, but various pilot projects are underway. Green hydrogen producers the world over also face a lack of offtake diversity, with few countries likely to import green hydrogen until well into next decade.
Learn more about the challenges and opportunities in Australia’s thermal and metallurgical coal markets in our insight, ‘Things we learned from Brisbane’s Coal Forum 2023’. Fill in the form on the page for your complimentary copy.