Last week I wrote about the spike in Chinese demand for coal, which was driving a boom in coal M&A deals.
The phenomenon has not gone unnoticed by environmental campaigners, many of whom are quoted in a piece today in the New York Times.
The paper reports:
At ports in Canada, Australia, Indonesia, Colombia and South Africa, ships are lining up to load coal for furnaces in China, which has evolved virtually overnight from a coal exporter to one of the world’s leading purchasers.
Just two days ago the Wall Street Journal picked up on Chinese state media reports that the government was worried it might run out of coal. The paper reported:
State-run media reported that Beijing is considering capping domestic coal output in the 2011-2015 period, partly because officials worry miners are running down reserves too quickly to meet the needs of a rapidly expanding economy.
Those signals have been picked up by companies around the entire world, who are now clamouring to meet that demand.
As Asia’s major economies bound forward and their hunger for energy surges over the next decade, Indonesia is strategically positioned to take advantage as the world’s largest exporter of coal. It is also neatly placed geographically, on the doorsteps (well, almost) of China and India.
Rudi Vann, a leading coal analyst at Wood Mackenzie, told beyondbrics he expects Indonesian coal production to rise nearly 90 percent to 480m tonnes by 2020. By striking deals to sell it in exchange for infrastructure financing, Indonesia is using the resource to fix its own crumbling roads, ports, bridges – and its power plants too.
As you might expect, the competition to secure Indonesian coal is being led by China and India, as the FT reports on Thursday. Companies from the two countries signed a series of deals in recent months to finance billions of dollars in Indonesian infrastructure projects in exchange for thermal coal.