Monday, March 31, 2014

Let us kick start our coal policy

The 4th global coking coal summit was held in Taiyuan (Shanxi Province, China) last week. Besides coal mining enterprises, the summit was attended by coal, iron, and steel industry associations, buyers, suppliers, research institutions, and delegates from international stock exchanges. It is clear that this summit would help Mongolia to accurately align its coal policy with the coal market.

New Trend In China’s Market;

Having the United States and Russia ahead of them, China is ranked third by its proven coal reserves of 2.2 trillion tonnes. However, China leads the world in coal production. They produced 3.6 billion tonnes of coal last year and their total coal consumption reached 3.65 billion tonnes. It is projected that China will increase its coal production by 2.5% to reach 3.8 billion tonnes in 2014.

Depending on the properties, there are different types of coal: thermal coal and coking (metallurgical) coal. In 2013, China produced a total of 476 million tonnes of coke, 75 million tonnes of which were imported. Almost half of its coking coal imports were supplied by Australia while 20% came from Mongolia. In 2014, China’s coking coal production is expected to increase by three percent to reach 490 million tons, which will account for 70% of global coking coal production. China uses 80% of its coking call for production of steel and the rest to produce chemicals.

Production of steel and iron has replaced production of crops as the main economic pillar of China. Half of the total steel production of the world came from China in 2013. They used 50% of their steel for the construction of buildings and the other half for building infrastructure.

China is expected to have an average economic growth of 7.2% for the next ten years. The key to reaching such growth is urbanization. It is projected that China’s population will increase by 100 million in the next six years and 60% of the total population will be residing in urban areas by 2020.

The current percentage of China’s population living in urban areas is 53.7%. This great migration from rural areas to urban settlement in China will increase the demand for steel and expand the production of coke.

A representative from China Iron and Steel Association said that China’s coking coal production was to reach its peak in 2018 and stop growing in 2020. There has recently been constant market demand for coking coal, which is partly because of the increased efficiency of steel production as well as the reduction in excess capacity.

Furthermore, China has more scrap iron every year, which is increasing the amount of iron that will be reworked. It would further lead to a decrease in the processing of iron ore to produce iron.

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