Coal demand will enter the low growth period in the future

In China, electricity, steel, chemicals and building materials are the four major coal-consuming industries. The demand for coal consumption is strong, and their demand accounts for about 70% of total coal consumption. Among them, the coal consumption of the power industry (thermal coal) accounts for more than 50% of the total consumption. In the following, based on these four major coal-consuming industries, we analyze the current status and future trends of coal demand.

The increase in coal consumption in the power industry has reduced the electricity (thermal power) industry as the largest consumer of coal. During the “Eleventh Five-Year Plan” period and even in 2012, the scale of thermal power investment in China was reduced year by year. In 2011, the investment in thermal power was only 46.4% of that in 2005, a year-on-year decrease of 26%, and the proportion of thermal power investment in power supply investment dropped to 28.4%. According to the latest data, from January to November 2012, thermal power investment reached 79.4 billion yuan, down 13.23% year-on-year, continuing the downward trend in the previous period. Affected by this, the increase in coal demand for thermal power in the future will also show a narrowing trend. In 2011, the coal demand in the power industry reached 1.95 billion tons, a year-on-year increase of 10.8%. In 2012, the demand for coal in the power industry is expected to reach 2.05 billion tons, an increase of only about 6% year-on-year. In the coming years, the development of new energy will accelerate and the coal industry will face reshuffle. In 2013, China's thermal power investment continued to decline and became a high probability event. The number of new installed capacity decreased. Although the long-term perspective, the entire society has a very high growth in electricity consumption, thermal power still has potential for development. However, at present, thermal power is operating in a state of low profit, and investment may be less and less.

The sluggish operation of the steel market In 2012, there was a resurgence of the external European debt crisis. The economic growth rate continued to slow down, and the steel industry suffered the first loss of the entire industry in the new century. High stocks, shortage of funds, and poor sales have forced prices to fall to 18 years ago. It is not uncommon for them to stop production, change businesses, and suspend business. With the continuous regulation of real estate and the difficulty in maintaining the scale of infrastructure, the supply and demand situation in the steel industry is difficult to change. Data show that in the first three quarters of 2012, the steel industry consumed about 450 million tons of coal, an increase of 3% year-on-year, and the growth rate fell 3.7 percentage points.

The weak demand for building materials and chemical industry In 2011, the consumption of coal in the building materials industry reached 510 million tons, accounting for 16% of the total consumption of coal in the four major coal-consuming industries, which was a year-on-year increase of 7.9%. In 2012, the growth rate of the building materials industry in China slowed down, and the growth rate of cement production and demand showed a decline, resulting in a reduction in coal consumption in the building materials industry. In the first three quarters of 2012, the building materials industry consumed 390 million tons of coal, up 6% year-on-year, and the growth rate fell 2.8 percentage points.

The domestic methanol industry has excess capacity and weak demand. The technology of coal coking has gradually matured, but due to the spread of the international financial crisis, the rise of low-carbon economy and the enhancement of environmental protection, the development of the chemical industry has been greatly affected, and it has entered a state of slow development. In 2011, the chemical industry consumed 160 million tons of coal, an increase of 13.5% year-on-year. In the first three quarters of 2012, the coal consumption in the chemical industry was approximately 140 million tons, a year-on-year increase of 6.5%, and the growth rate dropped by 4.2 percentage points.

In 2013, the steady recovery of China’s economy will drive demand for electricity and increase the demand for coal. At the same time, the demand for industries such as steel, building materials, and chemical industries for key construction projects of the “Twelfth Five-Year Plan” approved and commenced will boost coal consumption by more than 30%. However, the current destocking process in China's steel, building materials, chemical and other high-coal-consuming industries is still not over. The problem of overcapacity is serious, and it is difficult for enterprises to accelerate the growth of production, which will limit the demand for coal.

In 2013, the domestic economy is expected to boost the demand for coal by boosting domestic demand with the support of policies. However, the coal market still faces numerous challenges. The domestic economy may only recover moderately and will not grow at a high rate. At the same time, domestic economic restructuring will increase, and the consumption rate of coal and other resources will decline. This means that the pattern driven by the heavy chemical industry will no longer continue, and the deceleration of high energy-consuming heavy chemical industry growth will inevitably lead to a weakening of coal demand.

After years of rapid development, China's coal industry is entering a period of adjustment. The total energy consumption control and structural adjustment of energy consumption may pose double constraints on coal demand. In the face of increasing carbon emission pressures and increasingly prominent energy security issues, the government is increasingly aware of the need to control total energy consumption. At the same time, it is paying more attention to developing new and renewable energy sources and reducing traditional fossil energy sources. In particular, the proportion of coal in the total primary energy consumption, in the next few years, coal demand may enter the period of low growth, the golden decade will cease to exist.