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Where is Peak Coal in China?

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Where is Peak Coal in China?

Where is Peak Coal in China?

With supply remaining abundant and demand staying weak, the debate continues on when Peak Coal will occur in China. However, as Wood Mackenzie notes in today’s infographic, it is perhaps more a question of “where” rather than “when”.

China’s a big and diverse place. The country not only has world’s largest population, but it is second biggest in land mass as well. It’s really a question of the provinces in China, and their respective trends in growth and electricity generation.

Coastal demand for coal is already peaking in China, and this is partially because it is those areas along the coast that were first opened up to free market activity via China’s Special Economic Zones (SEZs). They have already had their boom and that growth is now tapering. In the Chinese mainland however, many provinces are recording growth rates of upwards of 7% as China implements its Go West policy.

Lastly, the infographic points out the energy mix in 2030 in both coastal and inland China. On the coast, energy from nuclear and natural gas are almost equally important as coal for future energy needs. However, inland it is all coal, where over 3,000 TWh of coal capacity will be created between 2015 and 2030. This is more than all solar, biomass, nuclear, gas, wind, and hydro combined!

The country is also building an Energy Superhighway that will transmit 825TWh of coal-fired power eastwards towards the coast by 2030.

Original graphic from: Wood Mackenzie

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Base Metals

China’s Staggering Demand for Commodities

China uses more steel, cement, copper, nickel, and coal than the rest of the world combined. This chart shows China’s incredible demand for commodities.

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China’s Staggering Demand for Commodities

>50% of all steel, cement, nickel, and copper goes there

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

It’s said that in China, a new skyscraper is built every five days.

China is building often, and they are building higher. In fact, just last year, China completed 77 of the world’s 144 new supertall buildings, spread through 36 different Chinese cities. These are structures with a minimum height of 656 feet (200 meters).

For comparison’s sake, there are only 113 buildings in New York City’s current skyline that are over 600 feet.

Unbelievable Scale

It’s always hard to put China’s size and scope in perspective – and we’ve tried before by showing you 35 Chinese cities as big as countries, or highlighting the growing prominence of the domestic tech scene.

Today’s chart also falls in that category, and it focuses in on the raw materials that are needed to make all this growth possible.

Year of dataCommodityChina's % of Global DemandSource
2017Cement59%Statista
2016Nickel56%Statista
2017Coal50%NAB
2016Copper50%Global X Funds
2017Steel50%World Steel Association
2017Aluminum47%MC Group
2016Pork47%OECD
2017Cotton33%USDA
2017Rice31%Statista
2017Gold27%China Gold Association, WGC
2017Corn23%USDA
2016Oil14%Enerdata

Note: Because this data is not all in one easy place, it is sourced from many different industry associations, banks, and publications. Most of the data comes from 2017, but some is from 2016.

China Demand > World

There are five particularly interesting commodity categories here – and in all of them, China’s demand equals or exceeds that of the rest of the world combined.

Cement: 59%
The primary ingredient in concrete is needed for roads, buildings, engineering structures (bridges, dams, etc.), foundations, and in making joints for drains and pipes.

Nickel: 57%
Nickel’s primary use is in making stainless steel, which is corrosion resistant. It also gets used in superalloys, batteries, and an array of other uses.

Steel: 50%
Steel is used for pretty much everything, but demand is primarily driven by the construction, machinery, and automotive sectors.

Copper: 50%
Copper is one of the metals driving the green revolution, and it’s used in electronics, wiring, construction, machinery, and automotive sectors, primarily.

Coal: 50%
China’s winding down coal usage – but when you have 1.4 billion people demanding power, it has to be done with that in mind. China has already hit peak coal, but the fossil fuel does still account for 65% of the country’s power generated by source.

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Chart of the Week

The Decline of Coal in Three Charts

The decline of coal has been swift and unprecedented. We show in these three charts how it went from American energy hero to zero.

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The Decline of Coal in Three Charts

The Decline of Coal in Three Charts

How coal went from hero to zero in just five short years.

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

There was a time in the not so distant past that coal was the unquestioned all-star of the energy mix.

Just over a decade ago, coal-fired power generated more than 50% of U.S. electricity. Coal is cheap and found almost everywhere, but it’s also extremely easy to scale with. If you need more power, just burn more coal.

However, the decline of coal has been swift and unprecedented. That’s why it is expected that by 2020, only 22% of electricity will be generated from the fossil fuel.

What’s Behind the Decline of Coal?

While there is obvious environmental pressure on miners and utilities in the coal business, the number one coal killer is an unlikely source: hydraulic fracturing and horizontal drilling.

These two technologies have led to a natural gas supply boom, making the United States the top natural gas producer in the world. From 2005 to 2010, natural gas mostly traded in a range between $5-10 per mcf. Today, excess supply has brought it to a range between $2-3 per mcf, making it extremely desirable for utilities.

This year, for the first time ever, natural gas has surpassed coal in use for power generation in the United States. The EIA expects natural gas and coal to make up 33% and 32% respectively in the energy mix for 2016.

How the Mighty Have Fallen

Not surprisingly, shrinking demand has led to a collapse in coal prices.

The decrease in revenues have slashed margins, and now equity in some of the biggest coal miners in the world is almost worthless. Similar to some oil and gas companies, many coal miners accumulated major debt loads when prices were high and demand seemed sustainable.

Now major US coal miners such as Peabody Energy and ArchCoal have been obliterated:

 201120142016
Total$44.6 billion$10.6 billion$0.045 billion
Peabody$19.7 billion$7 billion$0.030 billion
Arch Coal$6.0 billion$1 billion$0.006 billion
Alpha Natural$10.7 billion$1.6 billion$0.003 billion
Walter Energy$8.2 billion$1 billion$0.006 billion

The top four miners have lost over $44 billion in market capitalization from their recent peaks in 2011.

That’s an astonishing 99.9% decrease in value, and possibly exemplifies the decline of coal better than anything else.

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