U.S. coal exports to China may be short-lived

U.S. coal companies counting on China to make up for declining markets at home should come up with Plan B, according to a new study by research firm IHS CERA.

That study found that Chinese coal imports will peak by the end of the decade and enter a prolonged period of decline, thanks to a combination of moderating demand and increased domestic production.

“Many companies that have targeted China as their strategic supply region in the long term may need to rethink that strategy,” Xiaomin Liu, associate director of IHS CERA in Beijing, said in a statement. “Some international suppliers will be able to compete effectively, but others will struggle to find a competitive edge as China’s market becomes ever more liquid.”

The IHS analysis found that Chinese imports have already peaked at 145 million tons of standard coal equivalent in 2012 and predict a gradual decline through 2035.

China became a net coal importer in 2009, driving the international coal market. But the study said the Chinese coal import boom will be short-lived.

It suggests coal demand in the Asian nation will reach a high around 2025, at 5.1 billion metric tons, up from 3.7 billion metric tons in 2011.

But production capacity within China is growing, lessening the need for imported coal.

China’s production of natural gas is expected to grow, as well.

Xizhou Zhou, director of IHS CERA in China, said shale gas production in China should begin to take off in the early 2020s.

“Substantial fuel-switching in key coal-consuming sectors — such as power — could occur as natural gas supplies come online,” he said.