The good news for anybody planning to spend billions of dollars developing a coal mine in Australia, Indonesia or Mozambique is that China's import demand may jump to 1 billion tonnes a year within two decades. But the bad news for mining executives is the Asian giant's imports may not rise much at all as domestic output growth can meet future needs.
Those are the contrasting views of two analysts who spoke at last week's Coaltrans India conference in New Delhi. Prakash Sharma, an analyst at consultants Wood Mackenzie, sees a massive increase in Chinese imports from 175 million tonnes to around 1 billion by 2030. Adding to China's expected surge in coal demand, Sharma forecasts that India will increase its imports by more than five times to at least 400 million tonnes over the same time span.
But the views of Luther Lu, a managing director at Chinese coal specialists Fenwei Energy Consulting Co, might give the board of any mining company pause for thought. Lu believes higher domestic output, a slower growth rate in coal consumption as the economy cools and increasing use of other types of power means China might not need to import much coal at all. Obviously both analysts can't be right, but both present convincing arguments in support of their views.
All this makes forecasting what China's coal demand will be in the next few years or decades extremely difficult, with even small changes in some parameters resulting in large changes to demand scenarios. Both Wood Mackenzie and Fenwei Energy believe Chinese coal consumption will rise, the main difference is the scale of the increase and whether the extra demand can be satisfied by domestic output alone.
China's imports will rise modestly to about 185 million tonnes to 225 million tonnes in the next two to three years, according to Wood Mackenzie's Prakash. The big leap in China's coal imports comes around 2020, when domestic output growth tails off and could no longer keep pace with consumption, Prakash forecasts. Fenwei Energy's Lu believes China's domestic coal output will rise by 200 million tonnes to 250 million tonnes in 2012, about a 7 percent increase from the 3.5 billion tonnes produced in 2011.