- Coal, a fossil fuel
is a readily combustible black or brownish-black sedimentary rock
normally occurring in rock strata in layers or veins called coal beds.
It is composed primarily of carbon along with variable quantities of
other elements, chiefly sulfur, hydrogen, oxygen and nitrogen. Coal is
extracted from the ground by mining, either underground or in open
- The degree of change
undergone by a coal as it matures from peat to anthracite is known as
coalification. Coalification has an important bearing on coal's
physical and chemical properties and is referred to as the 'rank' of
- Low rank coals
comprising of lignite or brown coal (17%) and sub-bituminous coal
(30%) account for 47% of total global coal reserves. While lignite is
largely used for power generation, sub-bituminous coal is used for
electricity generation, cement manufacture and by industry.
- Hard coal (53%)
includes bituminous coal (52%) and anthracite (1%). Bituminous coal is
further classified into thermal / steam coal and metallurgical /
coking coal. Thermal coal is used for power generation, cement
manufacture and has industrial applications. Coking coal is used
largely for manufacture of iron and steel. Anthracite has both
domestic and industrial uses.
- Coal reserves are
available in almost every country worldwide, with recoverable reserves
in around 70 countries. Global proven coal reserves are estimated to
last for 122 years at current production levels, as against 42 and 60
years respectively for proven oil and gas reserves.
- The total global
proven reserves are estimated to be around 910 billion tonnes, with
USA (27%), Russia (17%), China (13%), India (10%) and Australia (9%)
holding major share of the reserves.
- Global hard coal and
brown coal (lignite) production is estimated at 5845 million tonnes
(m.t.) and 951 million tonnes in 2008 respectively.
- China (2761 m.t.),
USA (1007 m.t.), India (490 m.t.), Australia (325 m.t.), Russia (247
m.t.) and Indonesia (246 m.t.) are the major global coal producers.
The top three producers account for 73% of the total production.
- Global hard coal
consumption is estimated at 5814 m.t. in 2008. The economic progress
of the world, especially in the emerging countries has lead to
consumption sharply increasing by around 65% from levels of around
3500 m.t. in 1990's. China, alone accounts for 46% of the global hard
- Coal provides 26.5%
of global primary energy needs and generates 41.5% of the world's
electricity. The countries heavily dependent on coal for electricity
generation include South Africa (94%), China (81%), Australia (76%),
India (68%) and USA (49%).
- Steel industry is estimated
to use approximately 13% (around 717 m.t.) of total hard coal
production and almost 70% of total global steel production is
dependent on coal.
- The global hard coal
trade in 2008 is estimated to be around 938 m.t., with total trade in
thermal coal estimated to be 676 m.t. The major global exporters of
thermal coal in 2008 are Indonesia (173 m.t.), Australia (115 m.t.),
Russia (86 m.t.) and Columbia (74 m.t.). The major global importers of
thermal coal in 2008 are Japan (128 m.t.), Korea (76 m.t.), Chinese
Taipei (60 m.t.).
World Thermal Coal Markets
Intercontinental Exchange (ICE), which offers European
and South African coal contracts, runs the world’s most liquid coal
derivative market. Coal futures are also traded on Chicago Mercantile
Exchange, which has acquired NYMEX.
- Coal is the most
important and abundant fossil fuel in India and it meets 55% of the
country's energy need. It is estimated that about 75% of total coal
consumed in the country and 80% of the domestic production is used for
- India is the world's
third largest coal producer with production of around 493 million
tonnes in 2008-09.
- India's hard coal
reserves are estimated to be around 246 billion tonnes, of which 92
billion tonnes are proven. Hard coal deposits of 56 billion tonnes are
spread over 27 major coalfields, mainly confined to eastern and south
central parts of the country. The lignite reserves stand at a level
around 36 billion tonnes, of which 90 % occur in Tamil Nadu.
- India's total
imports of hard coal in 2008 is estimated to be 60 million tonnes
(m.t.), of which 31 million tonnes is of thermal coal and 29 million
tonnes is of coking coal. The imports of thermal coal has increased
substantially from 10.31 m.t. in 2002-03 to 23 m.t. in 2006-07 and to
28.9 m.t. in 2007-08. The import requirements are projected to growth
further to over 40 m.t. in coming years.
- Despite, India's vast
coal reserves the country has become more dependent on imports of
thermal coal over the recent years. The poor quality of indigenous
coal supplies, logistics problems and lowering of import duty has made
imports a preferred choice for cement manufacturers, some other
industries, power plants, along the southern and western coasts.
Market Moving Factors
- Coal demand is
highly dependent on energy demand, as it is the major source for power
generation in many countries.
- Significant demand
from China and India is increasingly accounting for the bulk of
worldwide coal usage. Hence, coal demand and consequently coal prices
are dependent on the economic scenario in the emerging markets,
particularly China and India
- Coal prices are
influenced by the price scenario in other fossil fuels used for energy
generation, viz., oil and gas as if these become expensive, demand
will increase for coal and cause rise in its prices too.
- Despite, coal being
a finite resource, supply is not an issue in the medium term as global
reserves are still large, and technologies for the extraction and
utilisation of coal are improving.
- As coal is a
globally traded commodity, its prices are influenced by macro-economic
factors like global economic scenario, currency fluctuations,
geo-political tensions, interest rates, prices of other assets,
1 Metric ton = 1 Tonne = 1000 kilograms
1 Short ton = 907.184 kilograms
1 Long ton = 1016.046 kilograms