Fuelling the future: How anthracite is taking over the energy industry

 

Published: Tue 30 May 2023, 2:41 PM

Last updated: Wed 31 May 2023, 12:07 PM

Despite a swelling focus on green energy, global coal use continues to grow. In 2022, global coal use increased by 1.2 per cent to surpass eight billion tonnes, illustrating that developing countries are reluctant to abandon hydrocarbons despite increasing carbon footprint awareness. Before Covid-19, China and India were the top two burners of coal, with Indonesia and Vietnam following closely.

By Vaibhav Bhargava

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Growth rates of coal consumption in China and India were (respectively) 20.0 per cent and 30.2 per cent with anthracite — a hard, dense, and efficient coal with high carbon content — contributing as much as 60 per cent. So what are the main drivers behind anthracite consumption, how is the market changing, and what does the future hold for the cleanest of the 'dirty energy' fuels?


The many uses of Anthracite

Anthracite coal has the highest calorific value and lowest impurities of all types of coal, making it an extremely efficient fuel. Its low ash and sulfur content allows anthracite to produce fewer pollutants and Co2 emissions in the combustion process. Higher fixed-carbon content and less volatile matter have earned standard-grade anthracite a staple position in energy production, particularly in cooking and electricity generation.


However, what truly distinguishes anthracite is its potential for industrial use. Anthracite is the most popular Pulverised Carbon Injection and Ultra Low Volatile product, which means that it is actively used in steel mills and blast furnaces for making steel and reducing costs. According to World Steel Association data, about 89% of BOF blast furnace energy comes from anthracite coal. In comparison, input from electricity constitutes only seven per cent.

“Metallurgy, both ferrous and nonferrous, is a key branch of anthracite use, but it is not the only one,” said FTOREX Co-Founder Adam Kokorkhoev. “It is also used in the electrode industry, the production of ferroalloys, steel, aluminium, and the chemical industry. The development of these industries worldwide also indicates that the demand for anthracite coal will increase.”

The importance of anthracite for steel production continues to grow, and McKinsey reports that the industry is switching from coke coal after a period of extreme price volatility. Finally, anthracite is used when making cement production as it produces the high temperatures necessary for its production.

Exploring the anthracite trend

Long-term macroeconomic trends remain the main drivers for anthracite consumption growth. Currently, consumption is heavily skewed towards developing countries. In 2022, Asia Pacific consumed more coal than the rest of the world combined, and its share is expected to grow. This can be partially explained by populace growth and high population density pressing the demand for energy production.

Here, anthracite’s competitive advantage is its high carbon content. The concentration of coal production puts leverage on logistics, transportation, and supply chains. According to International Energy Agency data, China, India, Indonesia, Australia, and Russia account for 79 per cent of global coal production, while the rest of the world is relying on imports. In an environment of supply bottlenecks and increased transportation costs, the lower-cost advantages of less efficient coal are heavily dampened. Direct contacts with manufacturers, as well as established optimised logistical chains, will be the main competitive advantage of anthracite suppliers like FTOREX.

“Today's largest importers of anthracite are Asian countries - China, where the world's main steelmaking capacities are concentrated; Japan, India, and Korea,” said Kokorkhoev.

Another macro-driver is increased industrialization and construction expansion in the same countries. Infrastructure projects depend on electricity, cement, and steel; all industries that rely on anthracite. Considering the estimated $868 billion increase in steel production by 2030, 89 per cent of a blast furnace-basic oxygen furnace (BF-BOF)'s energy input comes from anthracite, and the current valuation of the anthracite market at $60 billion, there could be as much as a threefold increase in the following eight years.

Challenges for the industry

As more countries favour carbon emission limits, global consumption of fossil fuels is expected to decrease. However, coal remains a notable exclusion. Until the hydrogen method is tested and implemented, coal is integral to steel production. Further, we see a sentiment shift from environmental concerns to valuing energy security. Germany announced its intentions to boost reliance on coal, and even the US rebounded on its coal production estimates according to a Yale report.

The more pressing issue for customers will be maintaining supply and readying for price hikes. Supply is yet to bounce back from the pandemic reductions, and a boost in production capacity is urgent. Firms like FTOREX, with their ability to achieve better pricing via stronger bargaining power, will be bolstered.

A coal for the green age

Given strong macroeconomic pressure, such as increasing industrialisation, population growth, and new infrastructure projects, demand for anthracite production is likely to quickly increase over the coming years. While many experts worry about potential regulatory pressure from ecological concerns, it is unlikely to happen shortly due to a geopolitical environment of energy insecurity.

Even the contrary is possible. The recent Inflation Reduction Act in the US marked a sentiment shift as the government considered improvements in oil and gas production to qualify for eco-subsidies. As anthracite has the lowest impurity content and combustion emissions among all coal types, expect to see stronger adoption of this resource.

Vaibhav Bhargava is the contributor at Hackernoon and ReadWrite.


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