Lest anyone forget, global coal use is growing and shifting, not declining

Coal India Limited is a 35-year-old state-owned company, based in Kolkata (formerly Calcutta), that faces a problem: As the world's single largest coal mining company it can't keep up with its customers' demand.

In the US, the big coal mining companies have the opposite problem. Demand at home for their coal is declining, and one leading US coal producer, Consol Energy, said recently it now wants to get into the rival business of supplying electric utilities with natural gas, which the company thinks more of its customers will eventually want.

But in India, power generators are asking for more coal, and CIL, which is producing at about a 485-million-metric-ton level, is roughly 235 million metric tons short. The company's marketing director said at a meeting last week in Mumbai that CIL's customers have put in orders for 720 million metric tons for next year.

What that means is that CIL, and India as a country, are going to have to import a lot more coal. Our colleague Mike Cooper in Mumbai wrote recently that India's annual imports have been running at around 85 million metric tons/year. Coal-fired generation, at 53% of the total, is headed upward and will contribute to a doubling, if not tripling of Indian coal imports over the next five years.

A few rough numbers for perspective: world wide production of coal is 6.5 billion metric tons. China is the largest producer at about 2.7 billion, the US is second at just over 1 billion, and India third, at almost 500 million metric tons.

If India's imports do grow at the projected level, that means India's share of the so-called global seaborne coal market will, in about five years, come to match China's share. It is roughly estimated that by 2015, the two hugely populated countries could, combined, be importing as much as 450 million metric tons/year.

The biggest coal exporter in the world is Australia. That country produces 425 million metric tons/year, and exports 265 million metric tons of that.

A February deal struck between a Chinese power group and an Australian coal supplier took some people's breath away in how it foreshadowed the scope of what is happening. China Power International Development, which has almost 10,000 MW of capacity, much of it coal-fired, agreed to pay Australia's Resourcehouse $60 billion to supply it 30 million metric tons of coal a year for 20 years, starting in 2013.

Colombia is an active exporter of coal, as well. On Friday it was announced that India is taking its first-ever shipment of Colombian coal. Sources told our colleague Cooper that at 120,000 metric tons the shipment is small enough to be sent through the Suez Canal instead of around the Cape of Good Hope, which will cut freight costs.