Coal Faces: Changing Places
What do the structural changes in the global coal markets mean for business?
Right now, all the talk in the coal market is about Environment, Social, and Governance (ESG) and the Energy Transition. We have seen a collapse in coal generation in Europe and the USA. What we will see next is unprecedented divestment of coal assets by public traded companies.
Nevertheless, on a global basis the world still needs coal, and unfortunately for some years to come lots of it.
What does ESG and the Energy Transition really mean for the coal market and what can companies do to create and maintain a competitive edge while still driving towards a greener world for everyone?
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Coal companies compete for new markets
Global Coal generation last year fell 3%. The EU and USA fell by 24% and 16% respectively. Impressive. China however, now over 50% of global coal consumption, rose by 2%. India only fell by 3% and continues to build new coal-fired plants. The Rest of World rose by 1%.
The reductions in EU and USA were big but the rest of the world is not moving in tandem. This is causing a huge shift in the direction of global coal flows. Producers and consumers alike are struggling to efficiently access their “new” markets and find the best prices.
‘New’ producers focus on costs
The investor-capital flight from coal investments is causing banks to pull out of financing coal and publicly traded miners are being forced to divest their coal assets. These assets will most likely end up in private hands.
As these new owners fight for profitability, market discovery, costs and security & compliance risks will rocket to the top of their agendas.
Time to make that change
We find ourselves in a situation where the supply and demand side of the coal markets are restructuring simultaneously. Sellers remain in the same geographic locations – coal deposits are not known for moving – but the companies running them will soon be very different.
Buyers are changing both in terms of geographic location and the companies running them. All the while the world faces an uphill struggle to meet the coal generation reduction targets, not to mention the wind, solar and gas production growth, needed to satisfy the Paris Agreements 1.5 degree limit in global warming by 2030. That’s a lot of change to manage.
As coal companies navigate these market changes and the world tries to achieve its carbon emissions targets, finding the right price, at the cheapest cost, in the most secure manner will be important than ever. A balanced approach to People, Process and Technology will be the be the hallmark of those companies who emerge winners.
Daf Davies | Global Head of Marketing and Revenue | TradeCloud
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