China’s impact on the coal industry

coal

China has dramatically cut back on its coal use bringing carbon dioxide emissions down with it. And that will have an impact on the world’s coal industry. It’s a message to investors: stay away from coal.

Last year China placed an ­absolute cap on its coal use for the first time ensuring annual consumption growth will not exceed 1.5 per cent over the next seven years. That followed moves by Beijing to impose a tariff on imports while also raising quality standards.

The Independent reports that China’s reduction in coal use this year equalled the UK’s total emissions for the same period.

Analysis by Greenpeace has found that coal consumption in the world’s second largest economy fell by almost 8 per cent and CO2 emissions by around 5 per cent in the first four months of the year, compared with the same period in 2014.

Naturally, this will have an impact on coal prices around the world. Coal demand in China has peaked,” Laban Yu, a Hong Kong-based analyst at Jefferies told Bloomberg. “It went down last year, it’s probably going down even more this year. Coal prices will never recover, ever.”

That’s why it’s a bad time to invest in coal mining companies. And it might also tell us that plans to build Australia’s biggest coal mine, the $16.5 billion Carmichael mine and Abbot Point port expansion, hatched by India’s Adani Group, just as coal prices have collapsed is madness.

Tom Sanzillo , director of finance at the Institute for Energy Economics and Financial Analysis, told The Guardian
that the plans do not add up. “The combination of the expense of the development – a mine, a railway and a port – and a weakening of the coal price around the world combine to make this project financially unviable.”

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