Australian (ASX) Stock Market Forum

Coal - where to now?

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divs4ever said:
is the problem digging it ( including getting approvals to expand existing projects ) or delivering it , or maybe the right type of coal available ( maybe a bit of all of them )
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It's a question of capacity.

Take any given coal resource. That is, coal in the ground.

A portion of that is technically impractical to mine so write that off as worthless.

Some of what can be mined might be of poor quality. Someone might buy it locally but it would never be up to spec for sale etc. So forget that unless some local user wants it (in which case they'd either mine it themselves or whoever does mine it would be a contractor to that user and not really a coal supplier as such).

Of what's left, some or in the best cases all of it can be economically mined. That's the reserve.

Size of the coal deposit imposes a practical upper limit on the rate of extraction. It's just not possible to rip the whole lot out instantly etc.

Then there may be limitations on the capacity of local infrastructure. Roads, rail, power, water and so on. That may limit production to some rate that's lower than the limit imposed by the deposit itself unless you want to spend $$$ upgrading that infrastructure.

Then the economics of mining also impose a limit. Eg it may not be economic to double your capital investment simply in order to extract the same amount of coal in half the time, there's a balance point given the total quantity of the reserve is fixed.

Put that all together and the end result is any given mine has a maximum rate of production that can't easily be increased. Spend the money to overcome whatever the bottleneck is and then you just run into the next lowest bottleneck. Etc.

That being so, for a country the size of China or India mining enough coal means having enough coal mines in operation. From there it's the same as anything - sufficient investment to meet demand for the product.

In terms of reserves and production limits, India could certainly mine more in terms of reserves, the limits are other things like how many mines are developed, infrastructure and so on but for China that's far more questionable. Unless both Western understanding and Chinese government official data are seriously understating reserves then realistically they're at or close to the limits. The resource base just doesn't support continuing recent rates of extraction too much longer before decline sets in. :2twocents
 
Smurf1976 said:
The resource base just doesn't support continuing recent rates of extraction too much longer before decline sets in.
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Expanding on that, it's probably the single greatest aspect to the whole "China" story.

Claimed Chinese coal reserves, before mining, about 223 billion tonnes.

Mined thus far = 90 billion tonnes.

That leaves 133 billion tonnes being mined at the rate of ~3.5 billion tonnes per annum.

As the remaining reserve base gradually shrinks, it'll become harder and harder to keep enough mines in operation to sustain that production rate. At some point it starts to decline.

They could find more coal certainly but they'd need some pretty epic scale discoveries to reverse the overall situation that the production rate isn't sustainable. Bearing in mind that due to relatively low wages etc China already counts as "reserves" coal that would be considered uneconomic to mine if it were in Australia, Europe, Japan, US etc.

The history of coal mining in the UK is a good guide for what to expect. Production peaked way back in 1913 but as the reserve base fell, so too production slowly but relentlessly dropped off. 1980's politics might be heavily associated with it in the minds of many but in practice only slightly accelerated the end - production was already down 50% and falling by that time.

The UK being another place that, historically, had a coal industry that was disproportionately large relative to the reserves on which it was based. Inevitably it couldn't be sustained.
 
Obviously sooner or later,if we extract and burn it, coal will be gone and yes,as uk,at one stage...no more..but i was a bit surprised by mr @Smurf1976 numbers.
From what i could find:
In 2016 150 billions tons proven reserves
Link
in 2021(5 y) We find as explained above a huge variation but the pessimistic view is China may just have 30y reserve
Link
So no, China is not in coal resource shortage,still plenty of coal and in 30y..i will probably be gone...
BUT
As explained in last link, the virgin plentiful fields are in inner Mongolia and inhospitable areas with freezing snow impeded conditions.
And even pre covid,china was balancing its domestic production with a very small percentage of imports.
With 80pc of Chinese energy coal based, that tiny percentage was enough to create Australian and Indonesian coal boom
Add cold war and post covid boom:
->import vetoes and exploding growth demand this year depleted stocks and with winter coming and stranding resupply Chima faces coal shortage this winter.
So my view: it is a temporary situation..1y or so.. coupled with oil gas price boom caused by western green brainwashing which is preventing China to top-up missing domestic coal with cheap o/s oil gas.
Coal has at least 6m to a year of high price ahead.
But i bet you in a year china will have sorted that part out.
Will be a different story for oil and gas which will remain high so india and developing countries will ensure that coal demand and price remain elevated.
5y minimum of high energy price for the dirty carbon ahead
 
Australia still has its answer to Smokey thermal coals in its pocket but does nothing, or very little, to enhance. That is also the case in Indonesia and with China that buys coal from Indonesia and probably again from Australia once China has got off its high horse.

BCC technology, and other technologies, that has been available from White Energy Limited WEC has stalled at every crossroad as roughly 2 tonnes of low grade thermal becomes one tonne of pellets. Very less Smokey and more energy efficient. PT Bayan TBK of Indonesia broke a contract with WEC in 2011 for them to supply coal to the Tabang plant. Had they not done so very many more plants would be in action right now. China are really responsible as they withdrew an agreement not to buy low grade Smokey coal from Indonesia and giant companies, in the sector, like Bayan increased the supply of low grade thermal coal and steaming coal to China.
2014 - https://www.worldcoal.com/handling/..._to_upgrade_south_african_coal_fines_coal767/

The BCC technology has been available in South Africa where they have well over 3 billion tonnes of coal fines piled up all over the place and there are now about 33 billion tonnes worldwide. Due to upfront cost South Africa is responsible for not advancing the technology since 2009.
2014 - http://www.coaltechenergy.com/market-overview/
 
qldfrog said:
Obviously sooner or later,if we extract and burn it, coal will be gone and yes,as uk,at one stage...no more..but i was a bit surprised by mr @Smurf1976 numbers.
From what i could find:
In 2016 150 billions tons proven reserves
Link
in 2021(5 y) We find as explained above a huge variation but the pessimistic view is China may just have 30y reserve
Link
So no, China is not in coal resource shortage,still plenty of coal and in 30y..i will probably be gone...
Click to expand...
The issue is extraction rate is itself a function of reserves.

A 30 year coal reserve doesn't mean you can just keep producing at a constant rate for 30 years and then stop. You can't in practice, at a large scale national level, end up with a 1:1 reserves to production ratio 12 months before it all comes to a halt.

As China's coal reserve base diminishes, a point will inevitably come where the reserves to production ratio flatlines. That is, rather than the ratio declining actual production starts to decline instead and the reserves to production ratio then remains roughly constant with both reserves and production in decline.

That's not some theory of mine, it's just what happens with basically any situation where you've got lots of mines in a given area extracting whatever resource. In the context of an entire country or large region, reserves to production ratio only comes down to a certain point then production itself starts to fall as individual mines close, fewer new ones are opened and so on.

China will never run out of coal but assuming they follow the same pattern seen everywhere else with lots of mines extracting the same thing, at some point their reserves to production ratio will flatline and then production starts to fall. At what level is the unknown but if they've really only got a ~40 year reserve at present then, in the absence of massive new discoveries, it's going to be something that happens this decade or next.

Of course if they've got far more coal than most assume to be the case then that changes everything but the reality of coal production having essentially plateaued for the past decade, despite rising consumption, does raise questions there about the adequacy of reserves.

If they've got coal and are having no major barriers to mining it then that raises the question of why they'd rather import? :2twocents
 
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Adding to previous post, my underlying point is simply a thought that China will likely continue to be a net importer of coal.

Regardless of the reason, production has been stalled for a decade now.

Add in the reserves, which I'll acknowledge are somewhat uncertain, and it's at least possible that the reserve base is a barrier to raising production to match consumption even if other hurdles could be overcome. That is uncertain but possible.

So I'm thinking that China won't be ending its imports of coal for quite some time.
 
Smurf1976 said:
So I'm thinking that China won't be ending its imports of coal for quite some time.
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Agree but does not mean they have to: they import our met coal because of its quality, and as opposed to Australia, they also have gov requirements pushing them to preserve some of their domestic capabilities.
And they do not export coal .ok maybe some strategic deal with North Korea and Iran..but not a commercial view.
The only interesting figure in my view is: prorata import vs domestic vs overall production for China
Unless something drastic has happened in the last 5 y or so,you will discover that imports are very small.single digit in percentage if i remember well.
Another point to be aware is coal mining is not iron ore or other metal mining: you have clear stata seams to be processed one after the other..very rough description...
But that mean that whereas a gold mine or nickel mine will go roughly from max quality to rubbish ore and so have a peak then down production profile.
But a coal mine will go seam by seam.kind of and a mine could for example sea its peak production arrive after a period of so so output .
Hope i am making myself clear..
The importance being is an individual coal mine will not have a gauss like production profile along time.
More binary.
Hope it helps but there's plenty of coal left in Mongolia..aka China, or Russia for China.
Another 20y no problemo...
 
Trading Economics makes the comment regarding coal....
"Coal futures rose slightly to $240 per metric ton on Friday but remained below a record of $269.5 hit on October 5th amid easing concerns about energy supply in China and Europe. Beijing ordered coal miners to boost production in an effort to curb an ongoing energy crisis, while Russian President Vladimir Putin said Gazprom will send more gas to European countries via Ukraine to ease the ongoing supply squeeze. Still, coal is up almost 200% so far this year as India is also faced with a major energy crunch, following China and Europe. The Indian government said the coal supply squeeze could last six months, as power plants reported to have enough reserves of the mineral for an average of 4 days of production."

Here is the current long term futures chart for coal from around 2010. Will it continue skyward? Nothing for me to draw on this chart, so let's put up a chart for NHC as well, this shows a falling overhead trendline that has yet to be tested. It certainly appears to have plenty of room to grow and offers a really good solid test line for future growth confirmation. Just for fun, I have drawn a measured move calculation on the 19-year chart as to where the price may move up to around $8.50 ish over time if it can break through the falling overhead trendline. Let's see!

coal 8.10.21.png

NHC 8.10.21.png
 
Chinese officials have ordered more than 70 mines in Inner Mongolia to ramp up coal production by nearly 100 million tonnes as the country battles its worst power crunch and coal shortage in years....

www.abc.net.au

China calls for huge boost in coal output to fight power crunch

Seventy-two mines in Inner Mongolia are given approval to boost production as China grapples with a major shortage.
www.abc.net.au www.abc.net.au

.... and I forsee the emergence of a Stakhanovite Movement (with Chinese characteristics) in the not too distant future.
 
Why wouldn't China use everyone else's coal before their own? Seems perfectly sensible to me when you have 20% of the Worlds population, use other people's energy and save your own.
Also IMO, it is why there is a push now for a carbon tax, Western manufacturers are never going to be able to compete against cheap labour and cheap energy, the only way will be by introducing tariffs which the carbon tax by de facto becomes.
Once everyone gets on the same page and a universal carbon tax is embraced by the U.S, U.K and the E.U, China's cheap energy becomes China's expensive products.
That is if the carbon tax is implemented correctly. :2twocents
 
qldfrog said:
But that mean that whereas a gold mine or nickel mine will go roughly from max quality to rubbish ore and so have a peak then down production profile.
But a coal mine will go seam by seam.kind of and a mine could for example sea its peak production arrive after a period of so so output .
Hope i am making myself clear..
The importance being is an individual coal mine will not have a gauss like production profile along time.
More binary.
Click to expand...
For an individual mine totally agreed. :xyxthumbs

For the world as a whole though we are indeed seeing a decline in coal quality:


For decades, many coal-producing countries have witnessed a steady decline in the quality of the coal produced. Often, this reflects the increasing exhaustion of reserves of higher grade coals and a growing reliance on reserves of lower quality. This trend is particularly apparent in many of the long-industrialised nations, where significant coal production may have been taking place for several centuries
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Many non-European countries are also experiencing an overall decline in quality. In Asia, India has seen a steady decline in domestic coal quality. This has been among the key factors responsible for reducing overall efficiency and creating difficulties in many coal-fired power plants. These were designed for coals of a particular quality, and the use of higher ash levels and less consistent properties has resulted in a range of operational problems
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Now I'm not suggesting that the world's running out of coal tomorrow but as with anything, the best resources are used first. Best being a combination of quality plus ease (cost) of extraction and as time passes we move onto lower quality or more costly resources.

What I do know with reasonable certainty though is that price is a problem. USD 240 per tonne is no doubt highly profitable in the short term for miners but in the long term that's going to dent consumption. It's hugely expensive by historic standards. :2twocents
 
Smurf1976 said:
For an individual mine totally agreed. :xyxthumbs

For the world as a whole though we are indeed seeing a decline in coal quality:






Now I'm not suggesting that the world's running out of coal tomorrow but as with anything, the best resources are used first. Best being a combination of quality plus ease (cost) of extraction and as time passes we move onto lower quality or more costly resources.

What I do know with reasonable certainty though is that price is a problem. USD 240 per tonne is no doubt highly profitable in the short term for miners but in the long term that's going to dent consumption. It's hugely expensive by historic standards. :2twocents
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Or is it just the sign that one USD is not actually worth that much anymore?
Do we have a coal cheeseburger index??
But yes current prices will have to go down.and they will.just temporary blip
Oil is getting harder to get and rarer, coal just a bit harder but still not rare in my opinion, it is far too early to see the demise of coal as a result of a resource constraint.i am talking next 2 decades at least.
Costs, artificial taxes and legislation,etc can affect use but in a (non existing) free market economy, there are no issue yet.
I would not change my super investment to bet for coal exhaustion .
 
qldfrog said:
Or is it just the sign that one USD is not actually worth that much anymore?
Do we have a coal cheeseburger index??
Click to expand...
We're having similar thoughts there.... :)

The biggest problem with coal is getting accurate information about it. Search online and you'll be presented with a barrage of politics, religion and fake news but very few facts from credible sources or even reasonably educated guesses.

That being so, well I'll certainly acknowledge that I'm not confident of the facts about what's in the ground and so on.

What I do know though is that price is a problem, big time.

240 USD is beyond silly and outright ruinous to those using the coal. A lot of operations are better off ceasing production completely at that price, hence the shortages of power, cement, fertilizer and so on. :2twocents
 
Smurf1976 said:
240 USD is beyond silly and outright ruinous to those using the coal.
Click to expand...

It could get even sillier based on a New York Times story. How is that decision not take our coal going?

A rush for coal in China as power shortages spread

China’s electricity shortage is rippling across factories and industries. Authorities announced on Wednesday a rush to mine and burn more coal in response, despite their previous pledges to curb emissions.

Mines that were closed without authorization have been ordered to reopen, along with mines and coal-fired power plants that were shut for repairs. Local governments have been warned to be cautious about limits on energy use.

The shortage laid bare a strategic weakness: China is a voracious energy hog and the world’s largest emitter of greenhouse gases. It also called into question whether Beijing can deliver strong economic growth.

Context: China depends on inefficient factories in energy-hungry industries like steel, cement and chemicals, but it practically stopped new coal investments in 2016 amid sustainability concerns. With rising demand as the pandemic eases, prices have jumped. Power plants were losing money, so they ran at lower capacity.

What’s next: The winter heating season officially begins on Friday in the country’s northeast. China’s biggest provinces have only nine to 14 days worth of coal in storage, according a coal data firm.
 
"China releases Australian coal trapped in storage to help fuel crisis
By Dan Murtaugh
October 7, 2021

China is releasing Australian coal from bonded storage as it seeks more fuel to relieve its stressed power system, Reuters reported.

It is about a year since Chinese leaders unofficially banned Australian coal amid escalating tensions between the countries. Some cargoes had been unloaded from ships and placed in bonded storage, with authorities not letting the fuel pass through customs to be used in the country.

Now that coal is being released, Reuters reported, citing unidentified sources. About 1 million tonnes remains in bonded storage, with some previously having been diverted to India, according to the report..............."

More here....https://www.smh.com.au/business/the-economy/china-releases-australian-coal-trapped-in-storage-to-help-fuel-crisis-20211006-p58xw8.html
 
Ann said:
"China releases Australian coal trapped in storage to help fuel crisis
By Dan Murtaugh
October 7, 2021

China is releasing Australian coal from bonded storage as it seeks more fuel to relieve its stressed power system, Reuters reported.

It is about a year since Chinese leaders unofficially banned Australian coal amid escalating tensions between the countries. Some cargoes had been unloaded from ships and placed in bonded storage, with authorities not letting the fuel pass through customs to be used in the country.

Now that coal is being released, Reuters reported, citing unidentified sources. About 1 million tonnes remains in bonded storage, with some previously having been diverted to India, according to the report..............."

More here....https://www.smh.com.au/business/the-economy/china-releases-australian-coal-trapped-in-storage-to-help-fuel-crisis-20211006-p58xw8.html
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Losing face is big in China, just wondering about the next response
 
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