In this week’s impressively frank assessments of both the markets and how he had got them wrong last year, Jens Ismar, ceo of Western Bulk reckoned the decline in seaborne coal trade had been the single most important factor driving rates down in 2014, predominantly caused by reduced coal imports to China. If that was the case, he and other bulker owners should prepare for further dramatic drops this year and next.
The past month has seen a welter of announcements coming from Beijing looking to create a greener China.
Pollution has become a hot button issue in the People’s Republic, a source of deep frustration for the populace at large. Living in some cities is akin smoking more than a packet of cigarettes a day – not only can you see the smog, you can actually taste it. Even Beijing’s mayor described his own city as “unlivable” last year. A former health minister estimates air pollution is killing half a million Chinese every year, while lung cancer has leapt 465% in China over the past 30 years.
China incinerates nearly as much coal as the rest of the world combined, however, its consumption of the fossil fuel looks to have peaked.
Last year, as Ismar noted, was rather a landmark one for China’s energy mix, the nation recording its first fall in both coal use and carbon emissions in more than 15 years.
There’s no let up in the anti-coal sentiment either. Reporter Chai Jing’s brilliant Under The Dome documentary expose on pollution went viral in the past month, watched online by more than 200m people in less than a week before being taken offline by authorities.
At this year’s National People’s Congress, premier Li Keqiang said he was ready to “declare war” on pollution. It is not the first time Li, nor his Communist Party confreres, have made bold anti-pollution statements but this time there appears to be more bite with what he is saying.
Following his speech the Finance Ministry announced that 10% more would be spent fighting air pollution this year. Coal-fired power stations would be upgraded to help them achieve ultra-low emissions, while attempts would also be made to introduce “zero-growth in the consumption of coal in key areas of the country”, Li said.
“Revolution in energy generation and consumption is vital to any country’s development and to the well-being of its people,” Li said, in announcing more funds for alternative sources of power. Li’s speech contained an apology for not having done more to fight pollution as well as a first ever on the record commitment to reduce carbon intensity.
Green activists in China are also cheering the appointment of a new environment minister, Chen Jining, a respected academic, who has vowed to confront an environmental challenge that is “unprecedented in human history”.
The Chinese capital is home to some of the worst pollution in the world, but also increasingly it is the hotbed for pollution cutting measures. The city will spend some $7.6bn to tackle the issue as it looks to host the 2022 Winter Olympics. Beijing will close the last of its four major coal-fired power plants next year, it has just been announced.
Plenty more coal-fired power plants across the nation will have to be closed if Beijing is serious in its anti-pollution drive. China gets about 64% of its primary energy from coal, also boasting the largest reserves of the fossil fuel on Earth.
As an aside, the ever growing crackdown on polluting industries is leading to repeated calls for China to set up its own emissions control area (ECA), something Hong Kong has jumped the gun on.
China’s coal cutting stance is bad news for bulker owners, while it would seem to be potentially good news for gas carrier owners – the People’s Republic is set to have LNG replace a lot of coal-fired power stations. However, here too the omens are not good for international owners, as increasingly Beijing looks to have Chinese operators securing its gas supply chain.
For bulker owners looking for coal solace, they’d better get India plans together. Indian coal demand formed a source of great optimism at this week’s Marine Money event in Hong Kong. The India coal story is a rare glimmer of hope for dry bulk. Earlier this year Wood Mackenzie said India will be central to supporting growth in the global seaborne metallurgical coal market this year, with a 2m tonnes rise in imports on the cards. India is expected to remain a key driver of global met coal trade growth over both the medium and long term. Of the 123m tonnes rise in global trade projected by Wood Mackenzie out to 2035, India is expected to account for 40% of this. That is, of course, depending on how locals react to the likely rise in pollution in what is the world’s largest democracy.