WEBVTT - Burning Issue: Peak Coal Close But Demand Lingers 0:00:00.480 --> 0:00:03.480 This is Dana Perkins and you're listening to Switched on 0:00:03.800 --> 0:00:06.440 the B and AF podcast. And today we talk about 0:00:06.519 --> 0:00:09.319 the technology that started at all when it comes to 0:00:09.360 --> 0:00:13.640 the Industrial Revolution, and that's coal. It remains persistent in 0:00:13.680 --> 0:00:17.120 the energy system three centuries later, and globally it emits 0:00:17.200 --> 0:00:20.759 more greenhouse gases than any other fossil fuel. Many of 0:00:20.760 --> 0:00:24.360 the technologies designed to decarbonize the power sector and ultimately 0:00:24.400 --> 0:00:27.240 replace coal, such as wind farms or solar power, have 0:00:27.400 --> 0:00:30.040 also come to rely on coal to a certain extent 0:00:30.120 --> 0:00:33.240 to manage seasonal intermittency in a way many of us 0:00:33.280 --> 0:00:36.560 may more often associate with natural gas. So this begs 0:00:36.560 --> 0:00:40.199 the question how often are we seeing fuel switching between 0:00:40.280 --> 0:00:43.200 coal and gas? And in parts of the world rich 0:00:43.280 --> 0:00:46.440 with domestic coal deposits where it can be cost competitive 0:00:46.479 --> 0:00:49.040 to keep coal on the grid, do we still expect 0:00:49.120 --> 0:00:52.919 to see coal fired power stations shuttered to meet climate targets. 0:00:53.159 --> 0:00:56.440 On today's show, we also talk about the weather and 0:00:56.480 --> 0:00:59.400 the big impact it has on coal demand as part 0:00:59.440 --> 0:01:02.560 of the reason that coal retirements may be slowing. To 0:01:02.600 --> 0:01:05.160 provide us with an update on coal, I am joined 0:01:05.160 --> 0:01:08.399 by Fausia Marzuki, the global head of gas markets for 0:01:08.520 --> 0:01:11.720 US at bn EF alongside you Me Kim, an associate 0:01:11.760 --> 0:01:14.920 focused on power markets. They draw from research found in 0:01:14.959 --> 0:01:17.920 a recent report titled Coal Outlook Hot and Cold to 0:01:17.959 --> 0:01:21.720 twenty fifty. Bn EF subscribers can access this report at 0:01:21.720 --> 0:01:25.440 BNF go on the Bloomberg terminal, or at BNF dot com. 0:01:25.520 --> 0:01:38.360 Now let's get to talking about coal. Umi Fowls, thank 0:01:38.360 --> 0:01:40.760 you very much for joining today to talk about coal. 0:01:41.000 --> 0:01:43.000 Hey, Dana, thanks a lot for inviting us. 0:01:43.120 --> 0:01:45.440 Thanks so much for having us, Dana, Coal is not 0:01:45.520 --> 0:01:47.480 a topic that features a lot on this show. We 0:01:47.560 --> 0:01:49.560 don't We actually don't talk about it a lot. When 0:01:49.600 --> 0:01:52.320 we're actually talking about global emissions all of the time, 0:01:52.520 --> 0:01:55.320 and we're talking about decarbonization all the time, and coal 0:01:55.360 --> 0:01:58.240 really is where it all began. Why did we take 0:01:58.280 --> 0:02:02.520 a closer look at this very important part of the 0:02:02.520 --> 0:02:05.920 emissions pie when so much of our narrative is focused 0:02:05.960 --> 0:02:11.519 on the transition and decarbonization opportunities, largely from a technology standpoint, 0:02:11.600 --> 0:02:14.399 And we've done plenty of shows about CCS. This isn't 0:02:14.440 --> 0:02:17.800 about CCS. This is about what's happening in coal right now. 0:02:18.080 --> 0:02:20.560 Why now, Why have you taken a closer look at it. 0:02:20.680 --> 0:02:24.040 Sure, Dana, we're talking about coal right now because it's 0:02:24.080 --> 0:02:27.000 still a thing a lot of the industry, a lot 0:02:27.000 --> 0:02:29.480 of the energy industry that the narrative was around, Okay, 0:02:29.600 --> 0:02:33.239 we're going to have peak coal soon. We're stagnating, it's 0:02:33.240 --> 0:02:36.080 coming down. It's finally coming down. We're phasing out, you know, 0:02:36.560 --> 0:02:39.400 end of coal, end of its rain. It's not going 0:02:39.440 --> 0:02:42.840 down without a fight. It's not abdicating just yet. Data. 0:02:43.200 --> 0:02:45.720 So what we're actually seeing is that twenty twenty four, 0:02:45.800 --> 0:02:49.040 there is actually that real chance that we will see 0:02:49.080 --> 0:02:52.359 a growth in coal generation in the power sector, i e. 0:02:52.800 --> 0:02:55.320 More emissions, you know, when we thought we were on 0:02:55.440 --> 0:02:57.960 track to be going down with coal. 0:02:58.240 --> 0:03:00.720 So there are definitely some details to pack here because 0:03:00.720 --> 0:03:04.200 I think so many people who are working in renewables 0:03:04.320 --> 0:03:07.000 or working even in gas are seeing all of these 0:03:07.080 --> 0:03:11.880 other technologies entering and cramping out. They're moving out these 0:03:12.440 --> 0:03:16.040 historical sources of baseload power. So we'll get to what 0:03:16.080 --> 0:03:18.000 that is in a minute, but can you just give 0:03:18.000 --> 0:03:20.720 me some definitions at the beginning. We've got thermal coal, 0:03:20.760 --> 0:03:23.520 we've got metallurgical coal. What are the main terms that 0:03:23.560 --> 0:03:25.160 we need to know as we head into this show? 0:03:25.680 --> 0:03:29.880 Absolutely, So we're gonna use thermal coal and met coal 0:03:30.480 --> 0:03:33.160 on this show. But thermal coal is basically the one 0:03:33.200 --> 0:03:35.680 that you use to produce electricity, I either one in 0:03:35.680 --> 0:03:38.440 the power sector. Now, in certain corners you will hear 0:03:38.480 --> 0:03:41.240 this referred to as steam coal, and then you've got 0:03:41.240 --> 0:03:45.600 metallurgical coal. You will also probably hear this as coking coal. 0:03:45.840 --> 0:03:50.480 In some pots, this gets you coke, and coke is 0:03:50.520 --> 0:03:53.440 basically what you put in the blast furnaces for steel making. 0:03:54.040 --> 0:03:58.080 So renewable energy capacity is growing, and in developed economies, 0:03:58.360 --> 0:04:01.760 coal based power generation has largely been on the decline. 0:04:01.960 --> 0:04:05.160 So given this, what does coal demand look like in 0:04:05.240 --> 0:04:06.720 twenty twenty four? Yeah? 0:04:06.800 --> 0:04:10.560 Sure, So it's definitely true that coal generation has been 0:04:10.600 --> 0:04:14.720 declining in developed countries like Europe and also in US, 0:04:14.960 --> 0:04:19.240 and in fact, coal retirements have been accelerating since the 0:04:19.240 --> 0:04:23.640 COVID years, and that's really powered by cheaper renewables, carbon 0:04:23.680 --> 0:04:28.160 prices and phaseout policies in those economies. But that's only 0:04:28.200 --> 0:04:30.919 a really small part of the bigger global picture. To 0:04:31.440 --> 0:04:35.440 understand coal, we need to understand Asia, which takes more 0:04:35.480 --> 0:04:39.200 than eighty percent of global coal generation. So if you 0:04:39.320 --> 0:04:42.600 take a look at India, and Southeast Asia, for example, 0:04:42.920 --> 0:04:45.520 power from coal is still on the rise from their 0:04:45.600 --> 0:04:49.240 growing economies and warmer weather. But when it comes to China, 0:04:49.360 --> 0:04:52.640 the biggest consumer of coal, their coal demand did actually 0:04:52.640 --> 0:04:55.640 start to slow down this year, and that's mainly because 0:04:55.680 --> 0:04:59.680 of the increasing solar and wind products and extreme rainfall 0:04:59.720 --> 0:05:02.960 that filled up their hydro reservoirs. So this gives us 0:05:02.960 --> 0:05:06.600 a hope that coal demand could finally stagnate this year 0:05:06.760 --> 0:05:10.320 after years of growth. But ultimately I think coal script 0:05:10.440 --> 0:05:13.479 on power is really difficult to shake off, and that's 0:05:13.560 --> 0:05:18.000 because both power demand and hydrogeneration is becoming really volatile 0:05:18.040 --> 0:05:20.800 from climate change. In fact, if you ask me this 0:05:21.000 --> 0:05:24.720 question about coal demand picking this year about a months ago, 0:05:25.000 --> 0:05:27.680 I would have said that core generation might marginally drop 0:05:27.720 --> 0:05:31.320 this year if strong winfall in China continues. But actually, 0:05:31.320 --> 0:05:33.479 as of today, I'm not really confident to say that 0:05:33.560 --> 0:05:38.000 anymore because recently hydro output in China showed a sudden 0:05:38.080 --> 0:05:41.320 drop and that means that cold plan needs to ramp 0:05:41.400 --> 0:05:44.239 up and fill that gap. So this kind of outlook 0:05:44.240 --> 0:05:47.000 for hydro output and also cooling them and is always 0:05:47.080 --> 0:05:50.200 changing depending on the weather, and this is making it 0:05:50.279 --> 0:05:53.840 really increasingly difficult to predict what will happen to coal demand, 0:05:53.960 --> 0:05:58.479 and in this kind of uncertainty, coal is unfortunately sometimes 0:05:58.520 --> 0:06:02.640 the only major source of secure power in emerging economies, 0:06:02.760 --> 0:06:06.040 and that's why we're still seeing China stockpiling coal at 0:06:06.080 --> 0:06:08.840 record high levels just so they can prepare for extreme 0:06:08.839 --> 0:06:13.279 weather events like that. So although we're still seeing signs 0:06:13.279 --> 0:06:17.200 of core demands deignating this year, we're also not expecting 0:06:17.200 --> 0:06:20.839 it to rapidly drop bighter. That's particularly our learning to 0:06:20.920 --> 0:06:23.680 me as the world is already breaching the one point 0:06:23.720 --> 0:06:26.920 in five degree warming subviider or Paris agreement, and core 0:06:27.040 --> 0:06:30.280 generation needs to come down fast to achieve net zero, 0:06:30.360 --> 0:06:32.039 but it's just not happening yet. 0:06:32.200 --> 0:06:34.600 I mean, that's a really interesting connection that you just drew, 0:06:34.680 --> 0:06:42.000 because ultimately decarbonization leads to lower warming scenario, which then 0:06:42.080 --> 0:06:45.040 leads to more predictable weather on a longer term basis 0:06:45.080 --> 0:06:48.719 so climate. But if the weather is unpredictable, then things 0:06:48.800 --> 0:06:51.800 like wind and hydropower and the disruption to the water 0:06:51.839 --> 0:06:56.080 cycle become even more unpredictable than they weren't before, meaning 0:06:56.200 --> 0:06:59.960 that coal has this void to fill. So you talk 0:07:00.080 --> 0:07:02.680 about the fact that China has been stockpiling some of 0:07:02.680 --> 0:07:05.239 this in order to be able to whether the storm 0:07:05.320 --> 0:07:06.200 no pun intended. 0:07:06.480 --> 0:07:07.040 What does that. 0:07:07.000 --> 0:07:09.800 Really mean then, for on the supply side and for 0:07:09.920 --> 0:07:12.800 pricing for those who are selling coal in China, is 0:07:12.880 --> 0:07:18.000 that market remained reasonably buoyant because of the stockpiling or 0:07:18.080 --> 0:07:19.360 is it fluctuating wildly? 0:07:19.920 --> 0:07:20.160 Right? 0:07:20.760 --> 0:07:24.680 So we're talking quite a lot about China here because 0:07:24.760 --> 0:07:28.640 China's influence and coal trade is so really strong. It's 0:07:28.680 --> 0:07:32.080 still the largest producer and import at the same time, 0:07:32.240 --> 0:07:35.320 so it's influencing coal markets is still really strong. And 0:07:35.400 --> 0:07:39.160 India comes next since its production and demand are growing 0:07:39.200 --> 0:07:42.200 at a really fast pace. So both China and India 0:07:42.280 --> 0:07:47.400 are prioritizing domestic production for energy security reasons. But this year, 0:07:47.520 --> 0:07:52.840 international prices are becoming actually cheaper since the energy crisis era, 0:07:53.160 --> 0:07:56.280 and we've seen China and India importing a lot to 0:07:56.360 --> 0:07:59.720 take advantage of those cheaper prices, and hence that's why 0:07:59.760 --> 0:08:03.480 we're seeing a lot of stock pilot efforts from these countries, 0:08:03.800 --> 0:08:04.440 and that's a. 0:08:04.360 --> 0:08:06.000 Great use for major exporters. 0:08:06.280 --> 0:08:11.480 So Indonesia, Australia, South Africa, and the US all boosted 0:08:11.520 --> 0:08:14.680 their overseas shipments as they see more demand coming from 0:08:14.760 --> 0:08:17.480 China and India. But when it comes to prices, the 0:08:17.640 --> 0:08:21.720 ripple effect on different indexes are very different. And that's 0:08:21.760 --> 0:08:25.880 because different producers around the world have different quality in coal, 0:08:26.200 --> 0:08:29.240 and we call that a colorific value in coal. So 0:08:29.280 --> 0:08:32.800 it's quite different from the ellen g world, for example, 0:08:32.880 --> 0:08:36.240 where the quality is more standardized. And that's why in 0:08:36.280 --> 0:08:40.160 the coal market it's common to see regional indexes having. 0:08:40.240 --> 0:08:41.359 Very different trends. 0:08:41.520 --> 0:08:46.240 So for Indonesia, it's the main producer of lower quality 0:08:46.240 --> 0:08:49.679 coal and they mainly export to China and India. And 0:08:49.760 --> 0:08:53.600 because the Indonesian government has been constantly boosting the production 0:08:53.760 --> 0:08:56.880 level in the past couple of years, pricing actually have 0:08:56.960 --> 0:09:00.400 been dropping so far in twenty twenty four. And at 0:09:00.400 --> 0:09:03.760 the same time, Indonaesans supply have to compete with local 0:09:03.800 --> 0:09:07.400 production from China and India, so that causes some downward 0:09:07.440 --> 0:09:10.640 pressure on their prices. The trend is quite different when 0:09:10.679 --> 0:09:14.080 it comes to higher quality coals, so that's markets like 0:09:14.120 --> 0:09:17.840 Australia and South Africa and also Colombia. So here the 0:09:17.960 --> 0:09:22.720 major consumers are Japan, Korea and some parts of Europe. 0:09:22.880 --> 0:09:26.200 China and India does import higher quality coal as well. 0:09:26.280 --> 0:09:30.200 But it is those developed countries who are oftentimes willing 0:09:30.240 --> 0:09:34.040 to pay higher prices, and therefore they set the market 0:09:34.080 --> 0:09:37.400 price for higher quality coal. And in those developed markets, 0:09:37.600 --> 0:09:40.040 fuel switching between cool and gas is one of the 0:09:40.120 --> 0:09:44.240 main price drivers. And because gas prices have been rising 0:09:44.280 --> 0:09:47.600 these days, coal prices for higher quality are also increasing. 0:09:48.120 --> 0:09:50.960 So you had mentioned fuel switching, and I'd love to 0:09:51.000 --> 0:09:53.959 get into that. Natural gas is often used for fuel 0:09:53.960 --> 0:09:56.600 switching with a variety of different sources. What is the 0:09:56.720 --> 0:09:59.280 role that coal plays and how does it interact with 0:09:59.280 --> 0:10:01.840 gas or maybe compete with gas when it comes to 0:10:02.040 --> 0:10:02.760 fuel switching. 0:10:03.040 --> 0:10:07.240 That's a good question. So first of all, for coal 0:10:07.320 --> 0:10:10.200 to gas fuel switching or gas to coal field switching 0:10:10.360 --> 0:10:14.600 to take place, there's mainly two requirements, which is that 0:10:14.640 --> 0:10:17.840 a country needs to have a significant gas and coal 0:10:17.880 --> 0:10:20.920 fleet and at the same time, the gas prices need 0:10:20.960 --> 0:10:24.320 to be competitive with the coal prices. So those two 0:10:24.320 --> 0:10:28.800 requirements are more common in develop economies like Northwest Europe, 0:10:28.960 --> 0:10:32.480 the US, and Japan and Korea in Asia. So if 0:10:32.679 --> 0:10:36.959 gas prices drop relatively lower compared with coal prices, then 0:10:37.120 --> 0:10:40.040 that makes gas plans more economical to run compared with 0:10:40.160 --> 0:10:43.960 coal plants. Well, that's unfortunately not the case right now 0:10:44.000 --> 0:10:48.280 because gas prices are rising from supply risk, so currently 0:10:48.280 --> 0:10:51.800 there's less potential for gas generation to be cheaper than coal, 0:10:52.040 --> 0:10:55.360 and these developed countries will need to continue to burn 0:10:55.640 --> 0:10:59.240 coal instead of gas unless the gas prices decline further. 0:10:59.559 --> 0:11:02.760 And when it comes to other emerging markets like China, 0:11:02.960 --> 0:11:05.840 we don't talk about coal to gas switching here because 0:11:06.000 --> 0:11:08.640 it doesn't meet the requirements that I mentioned earlier, So 0:11:08.880 --> 0:11:13.160 they don't have significant gas fleet or competitive gas prices 0:11:13.200 --> 0:11:17.200 compared with coal. They are definitely a growing market for gas, 0:11:17.240 --> 0:11:19.480 but when we look at their entire power mix, it's 0:11:19.520 --> 0:11:22.840 still very much dominated by coal, and because most of 0:11:22.880 --> 0:11:26.560 their coal supply, again comes from their local production, that's 0:11:26.559 --> 0:11:30.000 why coal generation continues to be the base load power 0:11:30.080 --> 0:11:32.680 in China, India and Southeast Asia. 0:11:33.120 --> 0:11:35.280 So FOOS is somebody who spent so much of your 0:11:35.280 --> 0:11:37.640 career focused on the gas sector. Can you talk about 0:11:37.679 --> 0:11:41.360 the interplay between coal and gas and essentially how closive 0:11:41.440 --> 0:11:45.079 kin are they and should I really be thinking about 0:11:45.400 --> 0:11:48.960 coal as something that's more competitive with gas than it 0:11:49.000 --> 0:11:50.079 is actually with nuclear? 0:11:50.679 --> 0:11:53.000 Great that you say sort of like kin, because I 0:11:53.040 --> 0:11:55.440 think gas has been waiting in the wings for a 0:11:55.480 --> 0:11:59.600 really long time to wait for its time to dislodge coal, 0:11:59.679 --> 0:12:02.280 and when coals out of the system, gas is able 0:12:02.360 --> 0:12:06.199 to rain. We're not sure that's exactly going to happen. 0:12:06.240 --> 0:12:08.880 Coal still sticking around, you know. First thing that I'll 0:12:08.880 --> 0:12:10.839 say is just that, yes, we think about it as 0:12:10.880 --> 0:12:14.319 baseload a lot of time, but both of these technologies 0:12:14.400 --> 0:12:18.000 geez are indeed flexible. So the gas industry always says, 0:12:18.000 --> 0:12:20.640 you know, okay, you know, we're the good solution to 0:12:20.720 --> 0:12:25.840 solve intermittency with renewables. That's why you should switch to gas. Sorry, folks, 0:12:26.080 --> 0:12:30.000 Coal actually also helps intermittency. It is actually flexible in 0:12:30.040 --> 0:12:33.199 that sense as well, so it can actually do the 0:12:33.240 --> 0:12:36.560 same thing that gas does in a power sector. It's 0:12:36.720 --> 0:12:39.160 just that for coal you can probably store it a 0:12:39.200 --> 0:12:42.360 little longer than gas, depending on your infrastructure. So that's 0:12:42.360 --> 0:12:45.000 actually why that we've seen and my colleague you Mei's 0:12:45.040 --> 0:12:47.200 talked about this that coal was the one that was 0:12:47.200 --> 0:12:51.200 switched on to be that flexible source of power when 0:12:51.360 --> 0:12:54.160 it was needed to help meet that incremental demand, be 0:12:54.240 --> 0:12:56.840 it for weather reasons or be it for whatever other reasons. 0:12:56.840 --> 0:12:59.320 So what does this all mean for gas? What does 0:12:59.440 --> 0:13:03.640 coal not peaking yet mean for gas. It means that 0:13:03.960 --> 0:13:09.280 gas can't necessarily be that replacement baseload in all of 0:13:09.320 --> 0:13:12.640 these different countries. So, for example, if you're talking about coal, 0:13:12.840 --> 0:13:15.240 you got to always talk about China and it is 0:13:15.720 --> 0:13:21.640 probably not worth gas is time to try to dislodge 0:13:21.800 --> 0:13:25.040 coal baseload power generation in a place like China where 0:13:25.040 --> 0:13:28.480 they've got abundant, cheap coal that they can just use. 0:13:28.800 --> 0:13:33.120 So in terms of the interplay between the two, it's 0:13:33.240 --> 0:13:37.320 everything from because the two have similar characteristics. It's just 0:13:37.320 --> 0:13:39.680 that one has less emissions, and that's what the gas 0:13:39.679 --> 0:13:42.840 industry tuts as why it should be the solution as 0:13:42.960 --> 0:13:45.520 the bridging fuel for the energy transition, especially in the 0:13:45.520 --> 0:13:48.680 power sector. You start thinking about how these two are 0:13:48.760 --> 0:13:51.000 going to compete with each other. That also means that 0:13:51.080 --> 0:13:55.080 pricing between these two are highly correlated to each other. 0:13:55.360 --> 0:13:58.280 It also means that where you have a lot of coal, 0:13:58.440 --> 0:14:00.480 maybe there's not much room for gas. Where you have 0:14:00.520 --> 0:14:03.600 a lot of gas, coal doesn't matter anymore. So how 0:14:03.760 --> 0:14:07.960 coal pans out is going to almost decide or influence 0:14:08.160 --> 0:14:09.800 what the role of gas is going to be in 0:14:09.800 --> 0:14:10.600 the power sector. 0:14:10.760 --> 0:14:13.120 And so by pricing you mean there you know, at 0:14:13.120 --> 0:14:14.720 odds with one another. So when one is up, the 0:14:14.760 --> 0:14:17.079 other is down. And so the market in this fuel 0:14:17.120 --> 0:14:20.600 switching space is essentially trying to move itself to the 0:14:20.600 --> 0:14:23.240 most beneficial or lowest price at the time. 0:14:23.480 --> 0:14:27.120 Absolutely, so that's the whole fuel switching idea now for 0:14:27.400 --> 0:14:30.480 so this is specifically for a thermal coal. Now, each 0:14:30.600 --> 0:14:35.359 commodity will still have its own unique supply demand fundamentals 0:14:35.360 --> 0:14:39.440 which will influence price, but because of the switching potential 0:14:39.600 --> 0:14:42.680 between the two, because they are both equally flexible, because 0:14:42.680 --> 0:14:46.280 they are both integrated into power systems in the same 0:14:46.400 --> 0:14:49.400 manner for a lot of these major economies, that's why 0:14:49.440 --> 0:14:54.760 their prices tend to be somewhat influence influential of each other. 0:14:55.120 --> 0:14:59.880 Mostly spot traded coal can be influenced by gas par 0:15:00.360 --> 0:15:02.680 and we saw a lot of that during the energy 0:15:02.720 --> 0:15:07.800 crisis data when gas prices absolutely soared and gas was 0:15:07.840 --> 0:15:11.160 no longer affordable, so the only alternative in the power 0:15:11.240 --> 0:15:16.680 sector was call those coal prices equally shot up, even 0:15:16.720 --> 0:15:19.480 though there wasn't as big of a disruption to coal 0:15:19.560 --> 0:15:23.240 trade flows. Now, yes, Russian coal was sanctioned too, but 0:15:23.320 --> 0:15:25.160 Russian gas was a bigger thing. 0:15:25.480 --> 0:15:27.680 Can you talk a little bit more about the volatility 0:15:27.680 --> 0:15:29.480 of the price of coal, and is that something that 0:15:29.680 --> 0:15:33.240 is moving wildly like gases. I mean, you just said 0:15:33.240 --> 0:15:35.440 that it also went way up during what we were 0:15:35.480 --> 0:15:38.200 referring to many people in the world are saying was 0:15:38.240 --> 0:15:41.720 a energy crisis, and over the winter of twenty twenty 0:15:41.720 --> 0:15:46.880 two was call more volatile than gas or about the same. 0:15:46.920 --> 0:15:49.560 Gas with far more volatile for a number of reasons. 0:15:50.240 --> 0:15:53.800 We'll get into a little bit more financial markets, liquidity stuff. 0:15:53.840 --> 0:15:57.240 There's a lot more people trading gas financial contracts out there, 0:15:57.240 --> 0:16:01.320 which actually starts influencing prices a lot more does have, 0:16:01.720 --> 0:16:04.840 you know, so sort of the less players playing in 0:16:04.840 --> 0:16:07.360 the financial space for call, and it's a lot more 0:16:07.960 --> 0:16:10.120 you know, it's a lot more dictated by the physical 0:16:10.160 --> 0:16:13.200 market with a lot less speculation. So yes, less volatile. 0:16:13.480 --> 0:16:16.360 Both of these benchmarks, both of these global matchboks have 0:16:16.600 --> 0:16:21.560 somewhat stabilized, but they flattened out a little bit. They 0:16:21.600 --> 0:16:25.320 have come down now the usual volatility with seasons and 0:16:25.400 --> 0:16:29.040 some demand changes, sure that still happens, but both of 0:16:29.080 --> 0:16:34.920 them have largely stabilized aside from your usual variations. But 0:16:34.960 --> 0:16:41.120 in terms of call prices, fluctuating, very dependent on quite frankly, 0:16:41.240 --> 0:16:44.200 we'll say again China and a little bit of weather too. 0:16:44.280 --> 0:16:49.000 Actually, if I can add on to what Foules just said, 0:16:50.200 --> 0:16:53.400 so big consumers like China and India, they source quite 0:16:53.440 --> 0:16:56.080 a lot from their domestic production and at the same 0:16:56.120 --> 0:16:59.800 time those countries enter long term contracts with the peaks 0:16:59.800 --> 0:17:04.000 of like Indonesia and also Australia. So that's why the 0:17:04.119 --> 0:17:07.879 overall international prices are relatively less full at all in 0:17:08.080 --> 0:17:10.359 coal markets compared with gas. 0:17:10.840 --> 0:17:13.240 So then actually, before we go to weather, let's go 0:17:13.359 --> 0:17:15.840 to trade, and let's talk about this very much as 0:17:15.880 --> 0:17:20.000 an actively traded commodity. Has that trade really changed because 0:17:20.040 --> 0:17:22.520 we've certainly seen that with gas, We've seen the advent 0:17:22.560 --> 0:17:25.760 of gas pipelines becoming liquefied natural gas in how ships 0:17:25.800 --> 0:17:29.520 are actually running that industry because of all of diversity 0:17:29.520 --> 0:17:33.199 and energy sources that are actually now in the power sector. 0:17:33.320 --> 0:17:35.879 Are we seeing a change to the flows into the 0:17:35.920 --> 0:17:39.000 trades or even for policy reasons, and you'd already mentioned sanctions, 0:17:39.320 --> 0:17:41.400 what's happening with coal trade and how has the world 0:17:41.560 --> 0:17:44.040 changed kind where is it now? For everybody who's not 0:17:44.119 --> 0:17:46.960 familiar with coal, give us an idea where it's coming from, 0:17:47.040 --> 0:17:47.720 where it's going. 0:17:48.359 --> 0:17:48.880 Sure thing. 0:17:49.080 --> 0:17:49.480 Okay. 0:17:49.680 --> 0:17:52.639 So the interesting one to note that's actually kind of 0:17:52.760 --> 0:17:56.200 happened in the last year plus or so is that 0:17:57.200 --> 0:18:02.080 China actually banned Australian call for a little bit of time. 0:18:02.280 --> 0:18:06.400 That's actually now with diplomatic relationships easing, that trade flow 0:18:06.480 --> 0:18:11.119 has actually resumed. Now when Australian call wasn't going to 0:18:11.240 --> 0:18:14.360 China anymore, that Australian coal needed to go other places 0:18:14.600 --> 0:18:19.400 and China needed to find replacement call. So Australian calls 0:18:19.440 --> 0:18:22.880 started going to other North Asian markets, so it went 0:18:23.320 --> 0:18:26.199 more of it went to Japan, and then China started 0:18:26.240 --> 0:18:30.400 taking a whole bunch more Indonesian call and neighboring ones 0:18:30.560 --> 0:18:33.000 and even to such an extent some of the South 0:18:33.040 --> 0:18:35.720 African call. So now when this happens and then you 0:18:35.840 --> 0:18:40.040 actually put later, you've got Russian coal trade flows being impacted, 0:18:40.320 --> 0:18:44.360 you've got South African call and US call actually now 0:18:44.400 --> 0:18:47.760 having to also recalibrate and kind of cover a little bit. 0:18:47.920 --> 0:18:51.200 So when Australia couldn't send to China, it was taking 0:18:51.359 --> 0:18:54.159 a little bit more coal that was coming from South 0:18:54.200 --> 0:18:58.080 Africa and Indonesia. That couldn't go to India anymore. So 0:18:58.200 --> 0:19:01.000 now India suddenly taking coal a little bit more coal 0:19:01.040 --> 0:19:05.560 from Baltimore, so it's going it can go that far. 0:19:05.640 --> 0:19:09.440 I mean, Colombian coal can actually come out to Asia 0:19:09.560 --> 0:19:11.840 now or at least that it was coming out to 0:19:11.920 --> 0:19:15.119 Asia in certain ways. So it's really interesting to see 0:19:15.200 --> 0:19:18.240 how these can change. And this dramatically impacts price. When 0:19:18.240 --> 0:19:20.280 you try to send Colombian coal all the way to Asia, 0:19:20.320 --> 0:19:22.400 that suddenly gets a lot more expensive when you start 0:19:22.400 --> 0:19:25.960 adding your shipping. And now, especially also with Europe on 0:19:26.040 --> 0:19:30.160 a general downward trajectory for coal consumption, all the coal 0:19:30.200 --> 0:19:32.000 that used to go to Europe needs to go somewhere 0:19:32.040 --> 0:19:36.119 else because they haven't necessarily brought down production yet of 0:19:36.160 --> 0:19:39.000 a supply of coal is not necessarily down either, so 0:19:39.040 --> 0:19:40.679 it's going somewhere. 0:19:40.359 --> 0:19:43.760 So it's just redistributing to other parts of the world. 0:19:44.640 --> 0:19:46.800 So one of the things that you me referenced was 0:19:46.840 --> 0:19:51.600 how China is this big consumer of coal and they 0:19:51.640 --> 0:19:54.320 do stockpilt by more than they need on an annual basis. 0:19:54.600 --> 0:19:57.160 Is that something that other parts of the world actually 0:19:57.240 --> 0:19:59.919 do And is this practice of actually stockpiling what drives 0:20:00.320 --> 0:20:02.359 is it in order to take advantage of what is 0:20:02.400 --> 0:20:05.520 perceived to be lower prices. Is it for energy security? 0:20:05.560 --> 0:20:07.520 Where does stockpiling come in the coal space? 0:20:07.840 --> 0:20:11.040 All of the above data, So China, it went through 0:20:11.080 --> 0:20:13.520 a rough period where it had a lot of blackouts 0:20:13.560 --> 0:20:15.280 and then there was a lot of pressure on the 0:20:15.280 --> 0:20:19.719 government to ensure there was good supply of coal or 0:20:19.840 --> 0:20:23.520 energy in that sense. So they stockpiled a whole bunch, 0:20:23.760 --> 0:20:26.840 got a lot of intonation coal. They made nice for 0:20:26.880 --> 0:20:29.760 the Australians. Again, they're taking their coal and they're also 0:20:30.000 --> 0:20:33.880 producing a whole lot more coal, right, so they're increasing 0:20:33.960 --> 0:20:37.399 production in the Shanxi province that's actually been up. But 0:20:37.440 --> 0:20:39.280 we'll come back to weather. But because there were some 0:20:39.320 --> 0:20:41.440 floods there, they had to reduce some of the production. 0:20:41.560 --> 0:20:44.400 But so all of the levers were being pulled. And 0:20:44.440 --> 0:20:47.800 what made it even more perfect for them was that 0:20:47.840 --> 0:20:51.720 coal prices were coming down. So they were absolutely probably 0:20:51.760 --> 0:20:55.679 taking advantage of the situation that coal prices were on 0:20:55.720 --> 0:20:59.320 a declining trend. Another thing, so so far this whole time, 0:20:59.359 --> 0:21:02.359 we've been talking about the seaborne trade of coal as well, 0:21:02.520 --> 0:21:06.439 and that thermal coal more specifically, but in general, coal 0:21:06.480 --> 0:21:10.199 stockpiles for China. What was one thing that really was 0:21:10.400 --> 0:21:14.440 interesting is that last year there was a huge increase 0:21:14.680 --> 0:21:19.760 in Mongolian coal production. Mongolia kind of doesn't have anywhere 0:21:19.760 --> 0:21:22.560 else to send that coal to other than China through rail, 0:21:22.720 --> 0:21:27.440 so China also had this huge receipt of Mongolian coal 0:21:27.520 --> 0:21:31.800 production that also helped it have all these stockpiles, and 0:21:32.040 --> 0:21:34.160 the you know, the big other thing to think about 0:21:34.400 --> 0:21:37.960 is that China's economy, if it doesn't actually recover to 0:21:38.000 --> 0:21:39.120 that same extent. 0:21:39.280 --> 0:21:40.560 Is it going to use all this coal? 0:21:40.960 --> 0:21:45.560 Is another thing. So stockpiles have absolutely been higher than 0:21:45.560 --> 0:21:48.520 we've seen in the last couple of years, and it's 0:21:48.720 --> 0:21:51.719 probably not going to go down that much because the 0:21:51.760 --> 0:21:55.119 incremental increase in coal generation is still not going to 0:21:55.160 --> 0:21:58.679 be so much so because as Yumias mentioned, we're seeing 0:21:58.720 --> 0:22:02.600 that boom in renewable energy generation. So a lot of 0:22:02.640 --> 0:22:07.240 that additional demand can be met by renewables, it's just 0:22:07.680 --> 0:22:10.520 lots of that base generation that is needed. 0:22:11.040 --> 0:22:13.840 So we had already discussed how important coal can be 0:22:13.840 --> 0:22:15.920 as a form of baseload power, and when we think 0:22:15.960 --> 0:22:20.520 about seasonal intermittency, which is something that is certainly accompanying 0:22:20.800 --> 0:22:24.760 renewable energy, coal can fill that place, and that is 0:22:24.960 --> 0:22:28.480 one of the areas where stockpiling comes in. Now, I 0:22:28.560 --> 0:22:31.959 want to know when it comes to other extreme events, 0:22:32.000 --> 0:22:35.000