London - A potential $112 billion (R1.2 trillion) of coal mine expansion and development to 2025 is uneconomic at current spot coal prices, a report by non-profit financial think tank Carbon Tracker Initiative (CTI) said on Monday.
CTI, which works to highlight how investment in fossil fuel resources might be affected by the global drive to curb climate change, said many of the world's future coal mines are not economic as Chinese demand growth slows.
The report was published the day before a major United Nations climate summit in New York, when around 120 heads of state and government will meet to discuss an ambitious climate deal due to be finalised next year.
China, which represents around half of the global thermal coal market, plans to cut coal use to below 65 percent of energy by 2017 to tackle air pollution, which CTI said will cascade through the seaborne market.
The companies most exposed to low coal demand are those developing new projects focused on export markets, it said.
For example, large coal projects in Australia's Galilee Basin, as well as mine expansions in the US Powder River Basin, would be vulnerable assets.
“The economics of coal are not looking good, and investors should scrutinise the economics of new mines in particular. Any investor should already be questioning whether high-cost thermal coal production can turn a profit,” the report said.
The US-based Institute of Economics and Financial Analysis has estimated that China's thermal coal demand could peak in 2016 and then decline gradually after that.
China could also become an exporter within a few years of demand peaking.
The resulting oversupply would flood the coal market, adding to a current glut, CTI said. - Reuters