Saturday, March 28, 2015

Beijing's Effort to Reduce Coal Burning Shows Results

Coal Power Plant in China (Credit: Click to Enlarge.
China is reducing the use of coal for power generation faster than expected, as the nation turns to cleaner-burning fuels and economic growth slows.

Beijing said this month that it would go all out to curb its addiction to coal to reduce pollution, raising fresh doubts about demand just after China’s coal imports had slumped a third in February from the level of a year earlier.  China is the world’s top coal consumer.

The Chinese economy is growing at its slowest pace in 25 years, and power companies are using a greater mix of hydro, nuclear and renewable options, especially wind.

Coal still makes up nearly two-thirds of China’s energy mix.

“The demand situation in China has deteriorated over the last few months much faster than we had expected,” said Georgi S. Slavov of the commodity brokerage Marex Spectron.

Last year, utilization rates at China’s thermal power generators fell to a record low 53.7 percent, down from 57.3 percent in 2013 and resulting in coal for power use dropping 18 million tons or 1.3 percent last year compared with 2013.

Many analysts said until recently that the burning of coal would soar into the 2020s as China’s effort to cut pollution was secondary to industrial growth.  But Beijing has started taking ever more aggressive steps to rein in coal use.

China’s coal imports fell 11 percent in 2014 compared to the previous year, the first annual decline in at least a decade.

“In 2014, Chinese coal imports decreased year on year for the first time in many years, and the prognosis is for more of the same, at least, in 2015,” the French bank Société Générale said in a report this month.

The market is taking note.  Australian coal prices — a benchmark for Asia — slumped 30 percent last year and dropped below $60 a ton this month to the lowest level since May 2007.  Producers are now holding back shipments to China amid uncertainty over quality checks under new ash and sulfur restrictions imposed in January.

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