China, a major strategic investor in fossil fuels, has set itself a 2014 target of slashing imports of thermal coal, and it looks as if that plan is on track. Guest contributor Justin Guay reported here in August, with a deep analysis, why consumption of Chinese coal had decreased during the first part of 2014.
New data from Deutsche Bank indicate that coal used to generate electricity dropped by nearly a quarter (23%) from last year’s stats in the month of August. The bank calculations come from a survey of thermal coal use by six major electric utilities serving large cities on the nation’s east coast, including three of the five largest state-owned utilities, which account for over 10% of Chinese coal demand.
Deutsche Bank finds the main drivers behind reduced consumption of Chinese coal include lower top-line power demand growth and strong seasonal hydropower output. The bank also mentions last year’s World Bank announcement that it would not fund new coal power plants “except in exceptional circumstances,” similar restrictions announced by US, Scandinavian, European, and UK development banks, and the possible effect of major international funds joining the fossil fuel divestment movement.
Sophie Vorrath quotes the bank’s report in Australia’s Renew Economy:
“The government mandate to reduce thermal coal imports this year by 40 mt year on year will trigger the first annual fall in China’s thermal coal imports since it became a net importer in 2009…. Compliance with this mandate is likely to be enhanced by the fact that the amount of import cuts have been individually assigned to the largest power utilities.”
Vorrath says that according to coal watchers at McCloskey, China will hold CEOs of its power industry responsible for the cuts. Penalties for noncompliance will include reduced power generation quotas. Even if only half of the mandate is achieved, China’s coal imports would drop by 8% this year.
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