Dropping coal position
As environmental initiatives bite, coal is losing favour at European ports. John Bensahlia reports
If you've read some of the headlines throughout 2017, you'll have noted that coal operations at ports have declined.
Rating agency Icra noted this decline, claiming that the rapid drop in coal volumes is an important concern for some of the major ports. For the April to August period, Icra found that coal volumes had dropped by 12%. The message from this is that ports dependent on coal must break out into other import/export categories in order to compensate for the dip in coal imports.
One key reason for lower coal volumes is the environment and environmental factors have affected coal management at ports around the world. Take China, where in order to combat smog and glut levels, certain measures have been taken. In July, it was announced that coal imports would not be allowed at smaller, second-tier Chinese ports. The ban affected 150 ports.
However, bigger ports such as Guangzhou - the largest coal transport hub in southern China - have also been affected. As a result of Beijing's plans to reduce the pollution incurred by the burning of coal, foreign coal imports were halted at Guangzhou in September. Meanwhile, another major Chinese port to have been affected by Beijing's plans to tackle pollution was Tianjin.
Statistics from the Port of Tianjin saw a decline in coal throughput, with coal handling levels falling by 24% in the first half of 2017. In addition to the pollution factor, the lower levels were attributed to a ban on using coal transportation trucks at the port (the ban had come into effect in March 2017). Instead, coal must now be transported by rail over long distances, which, according to Tianjin Port Development Holdings, has had a negative impact on the port's non-containerised coal trade. Instead, the coal has been diverted by traders and shippers to the port's northern rivals such as the Tangshan Port Group and the Qinhuangdao Port Company.
A similar state of affairs is occurring in the UK. A spokesperson for the Port of Tyne pointed out to Port Strategy that global coal demand began to decline in 2015. "The imported coal market has followed suit," the spokesperson said. "Port of Tyne coal volumes peaked at nearly 5.0m tonnes in 2013 but went down to zero in 2016.”
They added that in the UK, according to the Digest of the United Kingdom’s Energy Statistics, approximately 22% of electricity supply in 2015 came from coal-fired power stations. However, in November 2016, the Department for Business, Energy and Industrial Strategy announced a consultation to close the remaining coal-fired power stations by 2025.
“This shift from coal has been accelerated by incentives for power generators to increase supply in renewable fuels such as biomass and the European directive to reduce its greenhouse gas emissions by at least 20%, increasing the share of renewable energy to at least 20%.”
“As a result, most UK ports do not expect there to be a resurgence in the coal market.”
“Changes in government policy mean there has been a massive decline in the throughput of coal in recent years,” adds Gary Hodgson, strategic projects director, Peel Ports Group. “People in the industry, including ourselves, have been talking about this for many years and preparing for it. However, the speed of the change in the UK’s energy policy and mix of sources has been much more severe than most expected. Clearly, this has had an impact on any port where coal was a major commodity. However, at least in our case, we have a highly-diversified business and so we’ve been able to adapt to the change at the same time as maintaining our overall performance.”
With the recent government policies in mind, ports look to environmentally-friendly replacements to fill the gap left by coal. “Most UK ports are working with their energy-producing customers to invest in infrastructure to handle and store renewable fuels such as biomass which is rapidly replacing coal,” says the Port of Tyne spokesperson.
“The Port of Tyne has made significant investment in handling this relatively new commodity and has been pioneering handling and storage in the UK since 2010." It was then that it began handling wood pellets for Drax Power under a contract to handle and store up to 1.5m tonnes per year. Then, in May 2016, the Port of Tyne announced the start of building new facilities to handle, store and transport wood pellet for Lynemouth Power Limited (LPL).
"LPL is making good progress with its plan to convert the power station in South East Northumberland from coal to biomass," says the spokesperson. "The Port of Tyne has secured the agreement to handle, store and transport up to 1.8m tonnes of wood pellet every year once conversion is complete.”
Mr Hodgson agrees that there are opportunities within the energy sector. “We have adapted our experience and capabilities with project cargo to include wind turbines. So, we’re able to support the expansion of offshore sites in the Irish Sea from the Port of Liverpool.
"It’s a similar story at some of our other ports," he adds. "At Liverpool, we developed a £100m biomass terminal to support the former coal-fired power station in Yorkshire operated by Drax. While we do need to recognise the continued implications of government energy policy, that project illustrates the ambition and partnership working required to successfully adapt away from the coal era.”
At Hunterston, in Ayrshire, Peel Ports is actively pursuing a range of opportunities for manufacturing, processing, logistics and energy. The site is the deepest port on the UK’s west coast, has one of the largest dry docks in the country, is connected by two rail terminals and offers over 300 acres of development land. It has infrastructure suited for power generation, storage and exportation, and is also equipped to handle and process chemicals including liquefied natural gas which is increasingly powering Scottish industry and transport. "Those strengths are of benefit to a wide range of sectors and will help us to breathe new life into the site after the closure of the coal-fired Longannet power station in Fife,” says Mr Hodgson.
But like the beam from a miner's helmet, there is a ray of light for coal at ports in other parts of the world. Australia is a notable example, with recent reports of its federal government backing a A$100bn investment target to expand the country's coal industry.
While concerns have been raised over the environmental implications of coal usage, nevertheless, the International Energy Agency has predicted that yearly Australian coal production could rise from 408m tonnes to 467m tonnes by 2040. By the same year, the IEA has also forecasted a $104bn investment in coal supply in Australia, as a result of demand from Asian customers.
Australian ports have also seen recent positive progress for the coal sector. Australia's Port of Newcastle experienced a positive year, with recent statistics showing a strong performance from January to August 2017. Along with wheat, bulk liquids, fertiliser and steel, the Port of Newcastle has also seen a growth in coal, with an overall increase in total throughput of over 3.6m tonnes as compared with the same time period in the previous year.
The Port includes two coal terminals: NCIG (Newcastle Coal Infrastructure Group) and PWCS (Port Waratah Coal Services), and from January to August 2017, it reported that coal was up 2.0m tonnes from last year. This reflects “the continued recovery and strong global demand for high quality Hunter Valley coal", said the port. Exports to China, Japan, Taiwan, Vietnam, Philippines and India all increased in the first half of the year.
Other ports in locations such as Mozambique and Russia are also receiving investments for new coal terminals.
So, is there really trouble at the mine? While countries such as the UK and China are phasing out coal, in other parts of the world, there is still life in this fuel yet. As Australia's Port of Newcastle commented in its review of 2017 so far: “Strong demand for high quality Hunter Valley coal is expected to continue, as countries such as Vietnam and India require increased access to stable and affordable baseload power for their developing populations.”
STILL A WELCOME COMMODITY FOR SOME
Some parts of the world see a positive future for coal, with investments being made in new coal-handling terminals. In August 2017, Essar Ports signed a 30-year concession agreement with the Government of Mozambique for the development of a new coal terminal at Beira Port.
Mozambique is a major source of coal, exporting to international steel and power industries in locations like India, China and Japan. The new terminal is being developed in two phases. The first phase (costing around $275m to develop) is to include facilities such as dedicated berths, and state of the art, mechanised, environmentally-friendly systems. Rajiv Agarwal, chief executive and managing director, Essar Ports, said that the “prestigious national-level project” will “not only boost coal exports from Mozambique and strengthen its economy, but also deliver significant direct and indirect benefits".
Meanwhile, the largest dedicated coal port in Russia, Vostochny Port JSC (a member of the LLC Port Management Company) is getting investment for development of its coal loading terminal. LLC Port Management Company has invested RUB31bn ($517m) into the construction of the terminal, with the third phase including construction of a federal railway infrastructure.
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