SXCOAL Conference 2024 focuses on evolving dynamics of global coke industry
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The recently concluded SXCOAL conference, held from 25-27 September, 2024 spotlighted significant changes in the global coke industry. In recent years, production and trade patterns have experienced a major shift, with the Asian region, particularly China and India, emerging as the dominant forces in both coke production and consumption.
Evolving global coke trade landscape
As of 2023, global coke production capacity reached approximately 870 million tonnes (mnt) annually, with Asia accounting for the majority of production and consumption. According to the Risun Commodity Research Institute, about 82% of global coke production and consumption is concentrated in Asia. Notably, China stands out as the largest producer, with its coke output in 2023 reaching 492.64 mnt. In stark contrast, global production outside China was only 226.72 mnt.
Emerging players like India and Indonesia are making notable strides in the coke industry. Indonesia, in particular, has experienced a significant uptick in coke production due to new projects coming online. In 2023, Indonesia produced 5.12 mnt of coke, with projections indicating that this figure will nearly double by 2024. This shift represents a substantial change in global coke trade, moving production focus away from traditional centres like Europe and North America, where aging infrastructure and stringent environmental regulations pose limitations.
The trade dynamics within the coke industry remain predominantly regional, with Asia and Europe leading in exports and imports. In 2023, Indonesia and India emerged as significant players in this landscape, with Indonesia exporting 1.6 mnt of coke and India importing 323,000 t. European nations, such as Germany and Poland, continue to play crucial roles in the global trade framework.
Insights into the Chinese coal industry
The coal industry in China is navigating a complex landscape characterized by stringent policy reforms, shifting market dynamics, and evolving global energy trends. Under China's dual-carbon policies and the 14th Five-Year Plan, the coal sector is making strides toward enhancing production efficiency, ensuring safety, and embracing digitalisation.
Policy context and reforms
Key policy frameworks are instrumental in shaping the coal industry's trajectory. The Dual Carbon Policies focus on reducing carbon emissions while ensuring energy security. Safety standards are bolstered through initiatives like the "Opinions on Further Strengthening Mining Production Safety Work." Moreover, efforts to integrate smart technologies in mining operations underscore the industry's shift toward sustainability.
Market supply and capacity adjustments
China has successfully phased out outdated coal production capacity while introducing advanced capacity. Since the supply-side reform in 2016, approximately 910 million tons of outdated coal capacity have been eliminated, with additional advanced capacity expected in the coming years. However, the concentration of capacity in specific regions has led to a reverse supply-demand distribution, increasing logistics costs.
Challenges and future prospects
China's coal production in 2024 has exhibited regional disparities, with a total output of 3.05 billion tonnes, reflecting a slight year-on-year decrease. While certain regions like Inner Mongolia and Xinjiang reported production increases, others like Shanxi saw a decline. Additionally, balancing long-term contracts with spot market supply poses challenges, affecting market flexibility.
Looking ahead, the coal industry faces a dual challenge of transitioning towards green energy while addressing rising seasonal demand. As of 2024, non-fossil energy accounts for 57% of China's installed power capacity, with coal-fired power constituting 37%. This transition could exert pressure on coal consumption, while seasonal demand during winter may lead to price fluctuations.
Indonesian coal industry
The Indonesian coal industry is pivotal to the nation's energy security and economic growth, especially as global demand for coal remains strong, particularly from China and India. In 2023, Indonesia achieved record coal production of 775.18 mnt, marking a 12.8% increase from the previous year. The government has set ambitious production targets of 922.14 mnt for 2024, though output may slightly decline due to slower global demand and rising operational costs.
In 2023, coal exports reached 510 mnt, with China accounting for 42% of these exports. Despite challenges such as price volatility and increased regulatory burdens, domestic consumption is projected to remain robust, primarily for electricity generation.
With the government's continued support and focus on energy security, Indonesia's coal sector is expected to adapt to market fluctuations while maintaining its critical role in the economy. Key mining events in 2024, including the ASEAN Mining Conference, may further enhance the industry's prospects.
Mongolian coal market
The Mongolian coal industry has shown remarkable growth in recent years, making a significant contribution to the country's economic expansion. In the first half of 2024, Mongolia's GDP grew by 5.6%, with the mining sector accounting for a major share, increasing by 15.4%. Coal remains Mongolia's most critical export product, contributing 58% of the total export value between January and August 2024.
Mongolia's coal exports are primarily directed toward China, which remains the largest trading partner, accounting for over 90% of Mongolia's trade. In the first eight months of 2024, coal exports increased by 30% year-on-year, reaching 55.4 mnt.
As Mongolia enhances its coal infrastructure, such as the development of cross-border railways, export capacities are expected to rise further in the coming years, with projections suggesting that coal exports will reach 83.3 mnt by 2025 and 111 mnt by 2027.
The Mongolian government continues to focus on improving the efficiency of coal trade by implementing measures like the establishment of the Mongolian Stock Exchange for coal trading. These initiatives are expected to boost Mongolia's coal exports and solidify its position as a key player in the regional coal market.
Russian coal industry
Since 2021, Russia's thermal coal production has declined, with a projected drop of 4.5% in 2024 due to ongoing internal logistics challenges and sanctions. Despite a stable domestic consumption rate - primarily for energy generation - Russia's export opportunities are constrained by logistical issues and market competition, particularly with Australia in the Asian market. Notably, the southern ports' shipment declines are significant barriers to reaching export potential. However, the establishment of new ports and a potential recovery in coal production by 2028 may enhance Russia's ability to meet Asian demand, particularly from China, which seeks higher-quality coal amid its energy transition. While domestic prices remain lower than export rates, optimising logistics and focusing on export-oriented projects will be crucial for Russia's coal industry moving forward.
The SXCOAL conference highlighted a transformative period for the global coke and coal industries, underscoring Asia's emerging dominance and the need for sustainable practices. As countries like China and Indonesia adapt to changing market dynamics, the global coke industry is likely to continue evolving, driven by industrial growth, policy reforms, and technological advancements.
Looking forward, the coke industry is poised for sustained growth in Asia, particularly in India and Southeast Asia. These regions are experiencing rapid industrialization and rising steel production, which are expected to drive demand for coke. Conversely, traditional coke-producing regions like Europe and North America may face declines due to stricter environmental regulations and the phased retirement of older coke ovens.