Friday, 27 March 2015 02:02
SINGAPORE/BEIJING: China is reducing coal use for power generation faster than expected as the use of cleaner-burning fuels and slowing economic growth drags thermal utilisation rates to a potential record low, implying imports and prices will fall further.
Beijing said this month it will go all out to curb its addiction to coal to reduce pollution, raising fresh doubts about demand from the world’s top consumer of the fuel just after imports slumped a third in February from a year ago.
Clean-fuel policies, as well as an economy growing at its slowest pace in 25 years, are driving lower coal use, with power companies using a greater mix of hydro, nuclear and renewable options, especially wind.
Coal still makes up nearly two-thirds of China’s energy mix, but utilisation rates at thermal power plants – nearly all coal-fired – have dropped to 52.2 percent in the first two months of this year, Reuters calculations based on monthly power generation and consumption figures show.
If that rate holds for the full year, it would be a new annual low.
“The demand situation in China has deteriorated over the last few months much faster than we had expected,” said Georgi Slavov of commodity brokerage Marex Spectron.
Last year, utilisation rates at China’s thermal power generators fell to a lowest-ever 53.7 percent, down from 57.3 percent in 2013 and resulting in coal for power use dropping 18 million tonnes or 1.3 percent last year compared with 2013.
Many analysts said until recently China’s coal-burning would soar into the 2020s as its effort to cut pollution was secondary to industrial growth.
This consensus has shifted since Beijing started taking ever more aggressive steps to rein in coal use.
“China’s impact on global energy markets will be transformed as its oil and coal consumption growth slows fast,” Barclays said in a report this month.
Copyright Reuters, 2015
