Policy changes help China's coal prospects

With the introduction and implementation of measures to save energy and reduce emissions and promote economic diversification, China's coal industry is quietly changing. The continuous growth of clean energy and the continuous reduction of coal consumption will be the main direction of the future development of the industry.

China is actively committed to the development of clean energy and reducing coal consumption to achieve the goal of reducing the proportion of coal in the energy structure to 58% in 2020. Liu Xinhua, deputy general manager of Fenwei Energy Information Service Co., a Chinese coal industry consulting company, said in an interview with Australian mining media.

"China is already very close to achieving this goal," Liu Xinhua said. "Last year coal accounted for 59% of China's total energy consumption. At the same time, the proportion of natural gas, nuclear power and other renewable energy increased to 22%."

However, the National Bureau of statistics data show that although the share of coal in China's energy structure is shrinking, China's coal consumption is still increasing in 2017 compared with that of last year. Liu Xinhua said the data reflected changes in the economy and the shift to clean energy.

China is promoting the transformation of coal consumption to natural gas and renewable energy consumption. From 2017 onwards, the northern region began to implement the policy of heating coal to gas and coal to electricity. The key cities covered the "2+26" city of Beijing Tianjin Hebei air pollution transmission channel. Last year, 11 cities in Fenwei plain were added, and the pilot cities of northern heating and cleaning supported by the central government extended from 12 to 35. At the same time, the treatment of loose coal has increased obviously. China's bulk coal consumption is concentrated in two major areas, industrial and civil. In the industrial field, bulk coal mainly comes from small industrial boilers and small kilns, and civil bulk coal mainly distributes in the vast rural areas. It is estimated that bulk coal will be cut by 61 million tons in 2018. Among them, the industrial sector contributed 72% to the reduction of loose coal, and the civil sector contributed 28%.

However, Liu Xinhua stressed that coal is still China's basic energy and can hardly be completely replaced in the short term. Coal accounts for more than 94% of the proven reserves of China's three major fossil energy mineral resources, while oil and natural gas account for only about 6%. This resource endowment makes China's basic energy rely heavily on coal. The key to solve the pollution problem lies in promoting clean and efficient utilization of coal. According to figures from China Electric Power Enterprise Federation, as of the end of last year, the capacity of China's ultra low emission coal-fired generating units exceeded 750 million kilowatts, accounting for more than 75% of the total installed capacity of coal-fired power generation in China. From 2012 to 2017, the emission of sulfur dioxide, nitrogen oxides and smoke decreased by 86%, 89% and 85% respectively.

In addition to changes in energy structure, China's economic transformation and upgrading is also changing the prospects of the coal industry. Recently, China's economy has been changing from an energy intensive economy to a service-oriented economy, and the demand for electricity in every industry is constantly changing. The growth of electricity demand in the high energy consuming industries, such as manufacturing and infrastructure, is slowing down, while the consumption of electricity in the third industry is growing rapidly.

Last year, the total electricity consumption of the third industry reached 1 trillion and 80 billion kwh, an increase of 12.7% over the same period last year. Data from ITU show that in recent years, power demand in information transmission, software and information technology services industries continues to show an upward trend, with an increase of 23.5% over the same period last year.

The change of China's energy structure is in line with the trend of energy change in the world today. Many world-renowned miners, mostly customers and partners of Fenwei Energy, are reassessing their development direction. Rio Tinto has withdrawn from the power coal market, and BHP Billiton and Glencore have expressed their willingness to gradually fade out of the market. The change seems to be within Liu Xinhua's expectation. "These companies are diversified companies, the purpose of which is to optimize their product positioning to a large extent."

Liu Xinhua will be invited to attend the "international mining resources conference and Exhibition" held in October, and will make a keynote speech entitled "the latest changes in China's coal policy and its impact on the global market".