Some facts on China coal importing....

By Kevin Jiamjun and Sabine Johnson-Reise 

China is home to the world’s second largest proven coal reserves after the United States. In addition, prior to 2009, China was a net coal exporter. Coal is a cornerstone of the Chinese economy, representing 77 percent of China’s primary energy production and fueling almost 80 percent of its electricity. Moreover, China is the world’s top coal consumer, accounting for nearly half of global consumption in 2010.

 

Over the past decade, China’s domestic coal output has more than doubled while its coal imports have increased by a factor of 60—the country’s dependence on other nations’ coal exports is growing. In 2009, the global coal market witnessed a dramatic realignment as China burst onto the scene, importing coal from as far away as Colombia and the United States. With 182 million tons (Mt) of coal sourced from overseas suppliers in 2011, China has overtaken Japan as the world’s top coalimporter. More over, as the world’s top coal consumer, China’s imports could rise significantly again by 2015.

 

Given the enormous size of China’s domestic coal reserves, why is China moving to import coal from abroad instead of producing all its needs domestically? Might this phenomenon be as superfluous and foolhardy as carrying coals to Newcastle, England’s major exporter of coal in the fifteenth century? New castle, after all, had more coal than anywhere else.

 

Several factors could be contributing to China’s sudden entrance into coal import markets, including transportation bottlenecks, environmental and safety considerations, economic factors, and concerns about depleting coking coal reserves. Gaining a thorough understanding of the paradigm shift underway in the international coal trade requires exploring these factors in order to develop policies to best manage burgeoning coal imports in China and beyond.

 

China’s move to import increasing amounts of coal to add to its vast stores of domestic reserves will influence the global economy, geopolitics, and the environment. Effective policy tools and governance structures will be needed for China to manage its coal use and for the international community to deal between Chinese and foreign mining operations regarding mining practices, regulatory oversight, and operations.

 

First, China will need to enhance its coal value chain—from coal mining to preparation, transport, and end use—to improve efficiency, reduce the environmental and carbon footprint of coal, and address safety in the face of China’s increased global coal utilization and trade.

 

Second, it will be important to gain a better understanding of the relative costs and benefits of China’s emerging coal trade and the differences among Chinese mining companies and between Chinese and foreign mining operations regarding mining practices, regulatory oversight, and operations.

 

Third, the parallels underpinning energy and climate concerns in the United States and China could serve as the impetus for more bilateral cooperation on common coal conditions. Finally, oversight over growing global coal markets could be organized through new governance structures—international forums, regulations and standards, fiscal measures, and information—spearheaded by major coal export and import nations.

 

China’s recent move from being a net coal exporter to a net coal importer portends significant changes on the global stage, especially in terms of climate change. Understanding China’s rising coal imports is crucial for managing their global impact.

China is rich in coal, which accounts for 95 percent of the country’s fossil fuel endowments. According to the Chinese Ministry of Land and Resources, China’s proven coal reserves of 170 billion tons correspond to 19 percent of the global total, ranking second in the world after the United States.

 

Not surprisingly, coal has long been China’s most dominant fuel. Since the Chinese economy was opened to the outside world in 1978, coal consumption has been on a steady march upward, dominated by power generation and industrial use. By 2010, China’s coal consumption stood at nearly half of the global total. In the same year, Chinese coal made up 45 percent of total global production and currently represents 68 percent of the country’s primary energy consumption.

As the amount of China’s coal imports has drastically increased, so too has the number of its coal trade partners. Currently, Indonesia and Australia are the two largest overseas coal suppliers to China. During China’s eleventh five-year plan period between 2006 and 2010, these two countries accounted for half of China’s total coal imports. But there is a difference in the mixture of products coming from each of the two suppliers. Indonesian exports to China are dominated by steam coal, which is suitable for producing steam and mainly used in power generation; it accounted for 95 percent of Indonesian shipments to China in 2010. In comparison, coking coal, which is primarily used for industrial processes like iron and steel production, represented 63 percent of total Australian coal exports to China in the same year.

 

The majority of China’s coal resources are located in the western and northern inland provinces. The two provinces of Shanxi and Shaanxi and the autonomous region of Inner Mongolia alone account for nearly 70 percent of China’s proven coal reserves and more than half of national coal output. In contrast, many major coal-consuming centers are located along China’s heavily populated eastern and southern coastline, where less than 5 percent of China’s proven coal reserves are located but nearly 40 percent of national coal consumption was reported in 2010. This unbalanced coal resource distribution and consumption pattern means that coal must be transported long distances via railways, roads, or waterways (both inland river and coastal marine transport) from the west to the east and from the north to the south.

The environment could also play a part in China’s coal-importing decisions. Importing coal from overseas markets might enable the Chinese central government to close down many small and inefficient mines and prevent similar mines from being opened up, thereby protecting local environments. Still, no matter where coal is mined, the process often has detrimental environmental effects on the host country. Evaluating this local impact against global environmental challenges and preventing a mere shifting of local environmental burdens from China to other coal-producing countries requires closer collaboration between China and its major coal trading partners.

There is a vast amount of literature on local environmental degradation associated with coal mining activities. Local ecosystems and the health of residents adjacent to coal mines are particularly at risk. Acidic mine drainage and toxic coal sludge can contaminate local streams and groundwater. Mountain top removal causes forest destruction, loss of wildlife habitats, and subsequent erosion, while underground mining can lead to land subsidence. Local air pollutants—nitrogen oxide and sulfur dioxide, and toxic heavy metals, such as lead, mercury, and arsenic—cause damage to human health. And coal dust, which is stirred up through coal mining, preparation, transport, storage, and end use, can cause severe respiratory problems.

Moreover, both coal mining and processing are water intensive. Because many of China’s coal resources are located in arid regions, Chinese coal mining operations often compete with residents and agriculture for access to scarce water resources. As mining activities often draw heavily from ground water sources, they have depleted groundwater levels in many coal districts. This has detrimental effects on local flora and fauna, especially during increasingly more frequent periods of drought.