Homeland Energy Group Ltd. - Coal & Coal Markets

	Thermal Coal	Coking Coal
Major Producers	China, Australia, South Africa, Colombia, Russia, United States, Indonesia	Australia, Canada, United States
Major Exporters	Australia, South Africa, Colombia, Russia, United States, Indonesia	Australia, Canada, United States
Primary Use*	Burned for steam to run turbines to generate electricity either to public electricity grids or directly by industry consuming electrical power (such as chemical industries, paper manufacturers, cement industry and brickworks). During power generation the coal is ground to a powder and fired into a boiler to produce steam to drive turbines to produce electricity.	Used to make metallurgical coke which is used as a reducing agent in a blast furnace to temper iron ore into steel products.
Markets	Thermal coal demand rose dramatically during 2007 and 2008, primarily due to the increasing demand for power generation in the Far East. Prices also hit historic highs in mid-2008 of around US$200 and have dropped to around the $70 level. Even though the demand and price hikes were largely driven by Chinese demand, there was also a lot of sentiment distorting the true demand/supply picture for thermal coal. The actual demand/supply balance of steam coal and power generation did not, and still does not experience such wild swings. That is why the industry agrees that, even though the global financial crisis has had an impact on power generation forecasts, electricity production from coal is continuing at much the same pace as before and the current high $60s/low $70s price levels have remained steady throughout Q3 2009. However, forecasts indicate these levels will stabilise around the S$90/$110 mark during 2010 and beyond; these levels, the industry believes, realistically reflect the future supply/demand scenario. Energy experts believe that thermal coal prices are unlikely to fall below these levels in the longer-term.	Coking coal demand and prices reached record price levels during 2008 mainly because of China's dramatic increase in production of steel in recent years and demand for coking coal. Indian steel mills were also driving the demand for coking coal, but not on the scale of the Chinese. Coking coal prices hit around US$360/$380 per metric tonne in mid-2008 from around $140/$160 per metric tonne in the previous 3/4 years. This demand and price collapse is largely due to the steel industry being hit hard as the surging demand from China and other countries drops off, coupled with the soaring prices for materials used in steel making. The credit crisis and global economic slowdown have undercut customers in key markets - construction, automobiles and industrial equipment - sending prices tumbling and prompting steel companies to slash production, scale back shipment forecasts, delay expansion and cut back the workforce. Consequently, prices returned to the US$120/$140 pmt levels during 2009.
Demand	Forecast to increase at a steady pace throughout 2009 and increase from 2010 through to 2013 and beyond.	Dramatically decreasing with decreased demand for steel.
Outlook	So the fall of coking coal prices has not had an impact on thermal coal prices. The medium to long-term stability of thermal coal demand and prices is expected to continue. Coking coal demand, on the other hand, is expected to remain low, keeping prices depressed until 2011, according to some analysts.

Frequently Asked Questions

1. What is coal?

Coal is a fossil fuel. It is a combustible, sedimentary, organic rock, which is composed mainly of carbon, hydrogen and oxygen. It is formed from vegetation, which has been consolidated between other rock strata and altered by the combined effects of pressure and heat over millions of years to form coal seams.

2. What are the different types of coal?

The degree of change undergone by a coal as it matures from peat to anthracite - known as coalification - has an important bearing on its physical and chemical properties and is referred to as the 'rank' of the coal. Low rank coals, such as lignite and sub-bituminous coals are typically softer, friable materials with a dull, earthy appearance. They are characterized by high moisture levels and low carbon content, and therefore a low energy content.

Higher rank coals are generally harder and stronger and often have a black, vitreous lustre. They contain more carbon, have lower moisture content, and produce more energy. Anthracite is at the top of the rank scale andhas a correspondingly higher carbon and energy content and a lower level of moisture.

Source: The Coal Resource: A Comprehensive Overview of Coal. The World Coal Institute.

3. Where is Coal Found?

It has been estimated that there are over 984 billion tonnes of proven coal reserves worldwide (see definitions below in question 4). This means that there is enough coal to last us over 190 years. Coal is located worldwide -- it can be found on every continent in over 70 countries, with the biggest reserves in the USA, Russia, China and India.

4. What is meant by the terms coal resources, indicated reserves and measured reserves?

The term Resource refers to the amount of coal that may be present in a deposit or coalfield. This does not take into account the feasibility of mining the coal economically. Not all resources are recoverable using current technology.

Reserves can be defined in terms of indicated (probable) or measured (proved) reserves. Indicated or Probable reserves have been estimated with a lower degree of confidence than proved reserves. Measured or Proved reserves are not only considered to be recoverable but can also be recovered economically. This means they take into account what current mining technology can achieve and the economics of recovery. Proved reserves will therefore change according to the price of coal; if the price of coal is low, proved reserves will decrease.
Source: IEA Coal Information 2004

5. Who are the largest producers of coal?

While recoverable coal reserves are found in around 70 countries, the largest producers of coal are China, the USA, India and Australia. South Africa is the fifth largest producer of hard coal. Over 68% of oil and 67% of gas reserves are concentrated in the Middle East and Russia.

Top Ten Hard Producers of Hard Coal
(Million of tonnes - 2006e)

6. How important is coal compared to other sources for the generation of energy worldwide?

Coal provides 25% of global primary energy needs and generates 40% of the world's electricity.

7. Which countries depend significantly on coal for generating electrical power?

Coal is the major fuel used for generating electricity worldwide - countries heavily dependent on coal for electricity include (2006e):

Source: Coal Facts 2007, World Coal Institute
* only 2005 figures available for these countries

Links to Sites of Interest

The following sites provide additional information about coal, the coal industry, the production and uses for coal and its role in world energy and industrial markets.





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