Coal industry getting a bad rap - Canadian sector ‘told to fight back’

The global coal industry is under pressure and attack as never before, but the Canadian sector has been told “enough is enough” and it’s time to fight back.
About 350 delegates at the 2011 Canadian Conference on Coal in Vancouver BC late in September, were told by Canadian Coal Association chairman Bob Stan, who is president & CEO of Grande Cache Coal in Alberta, that coal is the number one energy source around the world.
“As far as I am concerned coal is still king,” he told conference delegates who came from as far away as China and
New Zealand. Stan said the coal industry needed to deal with facts —
something third parties and special interest groups were not so burdened with — such as how coal meets 42% of the electricity needs of the world and 29.6% of the global primary energy needs.
The world has abundant and relatively cheap supplies of coal compared to other energy sources. Stan said in Canada, where coal is the fastest growing major fuel source, there were 37 billion tonnes of proven reserves and coal use had grown by 48% in the past decade. “The question is not if coal will be used in future, but how
can we find a better way to use it,” he told delegates at the opening session. The Canadian government, meanwhile, is intent on closing down its coal-fired power stations starting in 2016, a move that has drawn the ire of at least two provinces,Alberta and Nova Scotia.
ENERGY LIMITATIONS
World Coal Association chair, Fred Palmer, echoed the sentiments about coal being useful in ending energy poverty. He told the conference that all forms of energy will be needed, but compared to coal the others have limitations. In 2011, the world would use over 7 billion tonnes of coal and for many coal meant electrification and “electricity means life and helps people live longer and better.”
As senior vice president of government relations for coal giant Peabody Energy, Palmer said his company was involved all around the world in seeking an end to concerns over carbon emissions.
“People are going to use coal no matter what happens on the carbon front, you won’t be able to stop it.” He noted that in the United States coal use was up 300% since 1970 and regulated emissions from coal fired power stations were down 84% in that time frame.
“Coal will keep growing and this has been and will be coal’s golden age,” he told delegates.
Another speaker, coal industry expert, Dr Neil Bristow, managing director of H&W Worldwide Consulting, said he was “very proud to be in the coal business” and he urged delegates to “move onto the front foot, not onto the back foot.”
CONFIDENCE HIT
Bristow said the world is currently in a situation where confidence was being hit by one recession and then not a double dip as some had contended, but another recession to follow. He predicted that there were “head winds ahead” and said world growth would likely be 4% in 2012 while China would drop slightly to 9%.
“While this will be a significant slowdown, things will start to pick back up, but perhaps more slowly than hoped.”
Speaking on the future of worldwide steel and coking coal, Bristow said world leader China continues to produce 90% of its steel in blast furnaces and had been running at a rate of about 700mt (million tonnes) on an annualized basis for much of the year. However, he expected this pace to slow a little in 2012, but said China would still show a 4–5% growth rate over the next four to five years “on some very, very big numbers.” Lower ash content coals were prized, he told the conference,
and Canada was “lucky” as its coals don’t suffer the ash and phosphorus problems that others around the world do. He said that the steelmaking coal market was expected to remain tight as demand would likely grow from China, India and other countries.
INVESTMENTS COSTLY
Meanwhile, investment costs had significantly increased, particularly in Australia, delegates were told by more than one speaker.
They learned from Gordon Zonailo, vice president of technology for engineering company Ausenco Sandwell, that increasing investments costs were “astronomical.” In the mineral rich Pilbara Region of Western Australia costs were running 200% higher than Canadian costs for a similar project.
Ausenco Sandwell has worked on over 500 marine terminals worldwide and Zonailo said that represented 1 billion tonnes throughput collectively each year, with another 1 billion tonnes of additional capacity.
Such projects stopped when the recession hit in 2008 and eventually came back to life on a smaller scale or with longer phases of development.
“Now the world is back to build it quickly.” He said there were 1.1 billion tonnes of iron ore projects in the works and a further 450mt per year of coal, but wondered how many would actually go ahead.
“We’re going into recession again. A lot will go ahead but subsequent stages will proceed more slowly.
ADVANTAGEOUS POSITION
Nippon Steel representative, Shinichi Fujiwara, director of raw material procurement, told the conference that the world’s second largest steel producer (following an announced merge with Sumitomo likely to be completed in October 2012) confirmed that Canadian coal producers were in an “advantageous position” to capture more of a rapidly expanding market.
Japan, with no mineral resources of its own, was looking to set up long-term ‘win-win relationships’ with resource rich countries such as Canada.
Fujiwara said Japan’s coal market business model using Australia and Canada for a balanced supply had collapsed and demand had exceeded supply. Japan was reliant on Queensland for 60% of its coal
supply, but with the three “once in 100 year disasters” in that state since 2004 it had proved to be a geographic risk for his country.
COAL IS GOOD
Meanwhile, the only politician to speak to the conference, Rich Coleman, British Columbia’s Minister of Energy & Mines, detailed five new coal mines in the process of coming on stream in the province.
“Coal is good and we are proud of its relationship in the world economy,” Coleman said. “We have to stand and promote it and make sure it is successful in future.”
ADDED CAPACITY
The conference was assured by Denis Horgan, vice president & general manager of Westshore Terminals, North America’s busiest coal export terminal, that Canadian coal infrastructure was expanding and could meet future demand.
Speaking on behalf of BC’s three export coal facilities — Westshore and Neptune Bulk Terminals in Port Metro Vancouver, Ridley Terminals in the Port of Prince Rupert, and Thunder Bay Terminal on the Great Lakes — plus the nation’s two major railways CP Rail and Canadian National, Horgan said about 20mt of new terminal capacity would be added over the next five years.
This would bring west coast capacity to over 70mt a year, plus a further 11mt per year at the
under-utilized Thunder Bay Terminal. And Horgan said the railways had spent or were spending several billion dollars on infrastructure, such as new locomotives and longer coal trains.
“We are all working together in the Canadian coal chain to an extent never seen before in our history,” Horgan told the conference.
The global head of commercial & business development for Walter Energy, Jim Griffin, reminded delegates that “Canada is not boom or bust” for coal supplies, but a politically stable and vital alternative to Australia for steelmaking and energy coals.
Walter Energy runs 15 mines in three countries, including three in British Columbia’s northeast where there are over 1 billion tonnes of metallurgical resources.
Production is forecast to reach 40mt a year in the northeast fields by 2014.