The Chinese factor is key to the evolution of global coal prices

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Recently, the China Office of the Sustainable Cities and Communities (SUC) project and the International Energy Agency (IEA) released the \"Coal Market Report 2017\" (hereinafter referred to as the \"Report\"). The Report provides a comprehensive review of the global coal market and the development trends of related industries since 2017, and offers an overall outlook on future developments in the global market, with a focus on the coal market in China, along with policy recommendations. The report states that by 2022, coal will still account for over 55% of China’s energy needs, and structural reforms on the supply side of China’s coal market are key to determining the trends in global coal prices. The Report predicts that 100 million tons of coal used in industrial applications (excluding the steel and cement industries) as well as in domestic use will be replaced by natural gas. Additionally, since the development of heavy industry has reached its saturation point, coal demand is expected to decline by 2022, although growth in coal conversion and coal-fired power generation will continue. Even so, by 2022, coal still accounted for over 55% of China’s energy demand. The report shows that the share of coal in the global energy mix is expected to decline from 27% in 2016 to 26% by 2022. ”The reason is that the growth in coal demand is slower compared to other fuels. Growth by 2022 will be concentrated mainly in India, Southeast Asia, and several other countries in Asia. Coal demand is declining in Europe, Canada, the United States, and China. China is by far the largest coal consumer, and the report predicts that its coal demand will decline gradually on a structural level, with some fluctuations associated with short-term market demands along the way. Due to these sharply different trends, global coal demand in 2022 reached 5.53 billion tons of standard coal, only slightly higher than the current level. The Report states that a competitive, economically viable, and safe coal mining industry is crucial to China’s economy. Ensuring the economic efficiency of the coal industry and the safety of coal mining is a key policy focus in recent times, while enhancing the competitiveness of this industry is another medium-term goal, aimed at preventing it from dragging down China’s economic development. But cutting costs is extremely challenging. Shutting down or merging inefficient coal mines and alleviating bottlenecks in coal transportation can reduce costs to some extent, but these benefits are offset by deteriorating resource conditions, rising labor costs, and increasing transportation distances. The problem of overcapacity needs to be addressed urgently, and the impact on local areas caused by issues such as the closure of coal mines and unemployment cannot be ignored either. Tian Yajun, a professor at the Beijing Institute of Low-Carbon Clean Energy, believes that for China, under the overall requirements regarding environmental protection, the future development trend of coal usage will be toward saturation or even a gradual decline. However, amid the current rapid changes, the demand for coal remains relatively high. He suggested that departments such as ** and research institutions establish energy big data, and use big data for analysis and exploration in order to provide scientific guidance for energy transition. The Report believes that price fluctuations will continue. Given China’s huge scale and dominant position in global coal trade, changes in either policy or economic conditions will exacerbate volatility in the global coal market. This volatility is further amplified when combined with supply disruptions. Coal prices will continue to be heavily dependent on China; therefore, supply-side structural reforms in China’s coal industry are key to the evolution of coal prices. Among the exporting countries, Indonesia deserves special attention; rising domestic demand, coupled with constraints on production increases, could lead to tighter market conditions and thus higher prices. On the demand side, import levels in China, India, South Korea, and Japan are key uncertainties. In response, Wang Zhixuan, full-time vice president of the China Electricity Council, said that China’s coal prices have a significant impact on global coal prices; this is due to market forces, but it is also influenced by policies such as those aimed at reducing overcapacity in China. Firstly, coal remains a major component of China’s energy supply, both now and in the future; this trend is not expected to change within the next 20 years. Secondly, coal-fired power remains an important pillar supporting China’s power transition and energy transition. He believes that at present, it is necessary to address properly issues such as how to accelerate the coal-power coordination mechanism and the **comprehensive coordination mechanism.