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World coal prices set to rise in next 5 yrs: IEA

(Global Times)

08:41, December 15, 2011

China's huge reliance on coal could drive world coal prices higher in the next five years, according to an IEA report released yesterday. But domestic coal prices will fall next year, experts said.

The IEA (International Energy Agency) report said the surging need for energy in emerging economies, China in particular, would increase coal demand over the next five years, with strong implications for world prices.

The size of China's domestic coal market is more than triple that of global coal trade volume, the report said. China also supplies more than half of the coal in international trade.

"The IEA estimates average coal demand will grow by 600,000 tons a day over the next five years," Maria van der Hoeven, executive director of the IEA, said during the launch of the report. "What happens in China over the medium term may impact the prices for electricity that consumers everywhere will have to pay."

"The international coal price may rise, but domestically the coal price will be lower due to the government's policy of limiting coal prices next year," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times yesterday.

Li Chaolin, coal analyst at Beijing-based Anbound Consulting, agreed that China's coal price would fall next year.

"The government's price limiting policy on coal is one factor," Li told the Global Times yesterday.

"Another is the slowdown in China's economy, which means less energy will be needed. Currently, the domestic coal supply is slightly more than the demand," he said.

"The international coal price is not only affected by demand and supply. The Chinese government is trying hard to ease the reliance on coal. And by 2016, China will have a huge change in its energy consumption. The proportion of natural gas and clean energy will grow," Tang Dechao, director of the Shanghai Pacific Energy Center, told the Global Times.

"China will soon launch a carbon tax, maybe in 2013. But I believe the tax won't be too heavy, as the major energy source in China is still coal," Lin noted.

"The carbon tax will be good news for new energies. But the drop in coal prices will be bad news for them, as new energies involve higher costs than coal," said Li Chaolin.

Wu Yin, deputy director of the State Energy Office under the National Development and Reform Commission, said earlier this month that by 2015, coal will account for 65 percent of China's total energy consumption, down from its current 70 percent.

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