Declining coal imports in China and record-high inventories in India point to a permanent, structural decline for the global coal industry, according to the Institute for Energy Economics and Financial Analysis.
“How long till a seasonal bit of weakness becomes a structural trend?” asks Tim Buckley, the Institute’s director of energy finance studies for Australasia. “I think we’re past that point.”
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In China , “coal imports were down 41% year-on-year again in May, and coal imports this year are now down 44% for the year compared to 2014,” Buckley notes. “So coal imports into China—the world’s recent former largest coal-import market—have halved in the past 18 months.”
And while domestic coal production in India is up 12% this year, the country is also “pushing hard to add 175 gigawatts of renewable energy,” 100 GW from solar alone , and courting a roster of international investors to get the job done.
“As all these trends develop, watch for divestment from coal companies to gain momentum globally,” Buckley writes. “The stock of Peabody Energy, the largest private-sector coal company in the world, is trading this morning at yet another record low after management departures. And the company has a few fire-sale assets on the block, by the way, as do several of its competitors.”