Coal for cement: Present and future trends

Coal provides around 90% of the energy consumed by cement plants around the world, despite the environmental harm caused by its combustion. It takes 200 - 450kg of coal to produce 1t of cement. The cement industry consumes around 4% of global coal production, around 330Mt/yr. Given the rapidly-expanding infrastructure projects underway around the world, particularly in developing countries where coal is the main fuel, coal consumption for cement is here to stay. Here Global Cement discusses the global coal industry, including trends and regulations and gives a forecast for coal use by the sector in 2050.

Coal overview

The World Coal Association has estimated that there are 892Bnt of coal reserves in the world, which, at current production levels, will last around 110 years.¹ Coal reserves exist in most countries, although the biggest deposits can be found in the US, China, Russia and India.

Coal is formed when vegetation is subjected to high pressures and temperatures over the course of millions of years. The type of vegetation, the depth and duration of burial and the temperatures and pressures at those depths all affect the properties of the coal. The higher the degree of ‘coalification,’ the lower the moisture content and the higher the carbon content and calorific value (Figure 1), which ranges from 15000 - 27000kJ/kg. As such, coal is divided into categories and sub-categories, as shown in Figure 1.

Cement production is extremely costly in terms of energy consumption. As the production process benefits from steady conditions, the use of fossil fuels with consistent calorific values and properties has traditionally been preferred to alternative fuels, where such values can vary widely. As coal is relatively abundant and more affordable than other fossil fuels, it has traditionally been the fuel of choice for cement production.

Coal production and market data

According to the International Energy Agency’s (IEA) ‘Coal Information 2015’ report, global coal production fell by 0.65% year-on-year to 8.02Bnt in 2014, including a 0.9% fall in steam coal, a 2.6% rise in coking coal to a record high of 1.06Bnt and a 2.9% drop in lignite production (Table 1).² Coal production fell most significantly in China (96.1Mt, 9.6%), Greece (5.9Mt, 10.9%) and Ukraine (24.1Mt, 35%), all of which have suffered economic and/or political turmoil in recent years.

Above - Table 1: Coal production volumes (Mt) in 2012-2014.
Source: http://www.iea.org/publications/freepublications/publication/KeyCoalTrends.pdf.

The world’s five largest coal producing countries in 2014 were China, the US, India, Australia and Indonesia (Table 2). Combined, these countries produced 6.29Bnt of coal in 2014, some 78.5% of the world’s total production. In contrast, the world’s top five cement producing countries in 2014 were China, India, the US, Iran and Turkey, which between them produced 2.85Bnt of cement in 2014, some 68.2% of the global total. The limited overlap between coal and cement production is to be expected, given that the cement industry only consumes around 4% of the coal produced every year.

Above - Table 2: The top 10 cement producing countries and the top 10 coal producing countries and production volumes (Mt) in 2014, ranked according to cement production.
Sources: The USGS, http://www.iea.org/publications/freepublications/publication/KeyCoalTrends.pdf.
Note: Countries that feature in the top 10 for both cement and coal production are highlighted in purple. * = Data for 2013. ** = Data for 2012.

Global coal consumption fell by 0.88% year-on-year to 5.54Bnt in 2014 (Table 3). The top 10 coal consuming countries consumed 4.81Bnt of coal during the year, or 86.8% of global consumption volumes. Eight of the top 10 coal consuming countries reported declining year-on-year coal consumption in 2014. However, India’s coal consumption grew by 12.1% to 551Mt and South Korea’s grew by 4.1% to 115Mt during the year. Globally, the majority of coal, some 68%, is consumed for the generation of electricity and commercial heat.³ For these applications it is possible for coal to be replaced by other fossil fuels or alternative fuels, as required by cost, availability or environmental regulations.

Above - Table 3: Coal consumption volumes (Mt) for the top 10 coal consuming countries in 2012 - 2014.
Source: http://www.iea.org/publications/freepublications/publication/KeyCoalTrends.pdf.

International coal trading

According to the World Coal Association, the majority of global coal production is consumed in the countries that produce it. 1.38Bnt of coal was traded internationally in 2014, just 25% of total coal production. Only 15% of hard coal is exported. In addition to ship and rail, coal can also be mixed with water to form a slurry, which can be transported via pipe. As transport costs represent a high proportion of overall coal costs, international trade is mainly limited to two regional markets:

• The Atlantic market - Western Europe, mainly the UK, Germany and Spain;
• The Pacific market - Developing and OECD Asian importers, mainly Japan, Korea and Taiwan.

According to the IEA, coal exports grew by 0.7% year-on-year to 1.38Bnt in 2014, including 1.05Bnt of steam coal and 322Mt of coking coal (Table 4). Coal exports have more than doubled since 2000. Steam coal exports fell by 1.72% to 1.05Bnt, while coking coal exports grew by 8.75% to 322Mt. At the same time, steam coal imports grew by 2.11% to 1.13Bnt and coking coal imports grew by 7.8% to 293Mt. There was a 40.1Mt ‘balancing item’ for world coal trade statistics in 2014 due to different import and export methodologies and the fact that Australia, India and Japan are reported for the fiscal year instead of the calendar year.

Indonesia is the world’s largest coal exporter; in 2014, its coal exports grew by 10.5% year-on-year to 410Mt (Table 5). The country is also the world’s largest exporter of steam coal, having exported 408Mt in 2014. Meanwhile, Australia, the second-largest coal exporter, reported 11.5% growth to 375Mt of coal exports in 2014. It is also by far the world’s largest exporter of coking coal, having exported some 180Mt in 2014.

Above - Table 5: The top coal exporting countries and a breakdown of their coal export volumes (Mt) in 2014.
Source: http://www.iea.org/publications/freepublications/publication/KeyCoalTrends.pdf.

China is the world’s largest importer of both steam and coking coal, although in 2014 its coal imports fell by 10.9% year-on-year to 292Mt. This included 229Mt of steam coal and 63Mt of coking coal (Table 6). India, the world’s second-largest coal importer, also consumes significant quantities of both types of coal. In 2014, its imports grew by 26.6%. to 239Mt.

Above - Table 6: The top coal importing countries and a breakdown of their coal import volumes (Mt) in 2014.
Source: http://www.iea.org/publications/freepublications/publication/KeyCoalTrends.pdf.

Historically, coal prices have usually been considerably lower than oil and gas. This means that coal is, and is expected to continue to be, the most affordable fossil fuel for the cement sector for many years to come. According to BP, coal prices fell in all the regions that it tracked in 2014 (year-on-year change shown in brackets):⁴

• Northwest Europe marker: US$75.38/t (-7.7%)
• US Central spot index: US$69/t (-3.4%);
• Japan coking coal import (CIF): US$114/t (-18.5%);
• Japan steam coal (CIF): US$97.65/t (+12.2%);
• Asian marker: US$77.89/t (-14.3%).

Note: CIF = Cost, insurance and freight (average freight prices).

Recent trends and events

Coal comprises around 85-90% of the fuel consumed by the global cement industry. Over the past 20-30 years, a trend away from coal (and other fossil fuels)has been witnessed, particularly in Europe, due to concerns over CO2 emissions and problems with waste management. However, more recently, other regions have increased their use of coal for cement production due to supply and cost volatility for other
fossil fuels.

India

India, where coal is the dominant fuel used for cement production, has suffered from inconsistent coal supplies for the past several years. Both quality and availability have been hit, while price increases have been noted. Cement and power plants have been forced to halt operations at times due to a lack of fuel. The supply dearth was blamed on state-owned Coal India Limited (CIL), which, in 2013, produced 82% of the country’s coal and owned 90% of its mines.5

According to Coal and Power Minister Piyush Goyal, India has adequate coal resources to meet demand, an estimated 302Bnt of reserves. In 2013-2014, CIL produced 462Mt of coal, missing a target of 482Mt. At the time, the Coal Ministry expected supplies to fall up to 185Mt short of the country’s projected 950Mt demand in 2016-2017. CIL’s ‘poor’ business practices, market monopoly and operating inefficiencies have been widely dubbed as the ‘Coalgate’ scandal by local media since 2012.

The domestic coal market started to change in September 2014, when India’s Supreme Court cancelled 214 of the 218 coal blocks that had been allocated since 1993. The blocks were originally intended for captive use by the cement, steel and power industries, but the allocation process had been accused of lacking transparency. Of the cancelled blocks, 12 belonged to cement companies. At the same time, the Indian government updated the Coal Mines (Special Provisions) Ordinance to allow commercial mining. This means that CIL will shortly have market competition. The re-allocation of the cancelled clocks commenced in December 2014, when 36 of the 98 viable coal blocks were allocated. A transparent auction process for 62 of the cancelled blocks for end-usage in power, cement and iron production started in 2015. Rounds one and two included 23 blocks each and took place in February and March 2015.

The market has continued to develop since then. In April 2015, Coal India (CIL) announced a major joint venture agreement with the India Railways to co-develop a number of railway projects to extract coal. The venture aims to create mega-infrastructure, for which about 50 separate projects across the country were identified. The plan is expected to help CIL double its coal production to 1Bnt by 2020. Later, in December 2015, CIL invested US$74.5m in India Railways to procure 2000 high-capacity wagons for coal transportation.

Signs that CIL’s recent improvement efforts had begun to bear fruit became evident when the Indian government reported that CIL’s coal production volumes had grown by 8.8% year-on-year to 321Mt in the April-November 2015 period. Analysts noted that improved volumes and efficiencies by CIL were ‘not optional,’ given that the first commercial coal mining operations were about to start. More improvements at CIL are also on the horizon. In January 2016, CIL announced plans to launch its biggest technology overhaul in four decades in order to curb ‘rampant theft’ and enhance efficiency. The upgrades are expected to cost around US$52m.

As the world’s third-largest producer and consumer of coal, India’s coal industry makes significant contributions towards global CO2 emissions. However, India’s Prime Minister Narendra Modi said in April 2015 that he would not bow to foreign pressure to commit to CO2 emissions cuts, instead pledging to use more clean energy and traditional methods, such as switching off street lights on full-moon nights, to lead the fight against climate change. “The world guides us on climate change and we follow them? The world sets the parameters and we follow them? It is not like that,” said Modi. “We can lead the world.” The Indian government said that it needs to emit more to industrialise and lift millions out of poverty. While in the past Modi has downplayed the dangers posed by climate change, he has also argued that the world must focus more on clean energy and less on outright emission cuts.

Egypt

Unlike many parts of the world, Egypt has historically relied on gas for the thermal energy requirements of its cement plants. However, Egypt’s 2014 cut to natural gas and fuel oil (mazut) subsidies to factories including cement plants, combined with a shortage of natural gas, prompted the start of a major fuel regime change.

Gas shortages became so severe at the start of 2014 that cement plants ceased operations or started importing clinker, while blackouts became commonplace throughout much of the country. In May 2014, Egyptian gas production dropped to 133Mm³/day from 166Mm³/day due to natural decreases in well productivity, according to Mohammed Hassan, Assistant Deputy Chairman of the Egyptian Natural Gas Holding Company (EGAS). Subsequently in June 2014, EGAS cut the volume of gas it supplied to cement plants by 61% from 11.6Mm³/day to 4.52Mm³/day.

Prior to 2014, coal was only permitted for use in the iron and steel, coke and aluminium industries. However, Egyptian law was updated in April 2014 to allow the use of coal as fuel for cement, iron and steel, coke and aluminium production, as well as in power plants, in a bid to boost the economy and the construction sector. In a nod to environmental concerns, one caveat is that coal imports can only take place after approval from the Ministry of Environment.

As a result of the major changes in fuel availability and regulations, a flurry of fuel regime changes at Egyptian cement plants was reported by local media. In May 2014, South Valley Cement (SVCC) said that the investments needed to use coal as fuel would cost US$19.8m, while for agricultural wastes it would cost US$283,000. It applied for licences for both. SVCC’s Samar Abd Al-Gawad said that substitution with agricultural wastes could not exceed 15-20%. “The challenge with agricultural wastes is that the market is not consistent and the products that are used as wastes, such as the linen seeds and corn cobs,
are seasonal.”

In July 2014, Sinai Cement Company (SCC) contracted FLSmidth to provide the equipment for it to replace natural gas and mazut with coal for cement production. Similarly, in October 2014, Misr Beni Suef Cement announced plans to build a US$27.9m coal mill by the end of 2015. Next, in November 2014, Titan Cement ordered a Gebr. Pfeiffer SE type MPS 2800 BK vertical roller mill for coal grinding, to be set up at line 1 at its Beni Suef plant.

In January 2015, Suez Cement, Italcementi’s Egyptian arm, said that it would spend US$84m during the year to convert its Helwan and Tourah 2 cement plants to use coal. “We finished converting two plants in 2014 (Kattameya and Suez). Now we have another two plants to complete,” said Italcementi’s Managing Director, Bruno Carrè. Suez Cement plans to convert all of its five cement plants to coal by 2017. The company’s energy costs rose by 25 - 35% in 2014, partly due to its commitment to the implementation of energy-efficient processes, as well as its further emphasis and utilisation of alternative fuels. These efforts helped mitigate its drop in production due to gas shortages. In the first nine months of 2015, the company’s profit fell by 14.6% year-on-year due to severe energy shortages that forced it to cut output by 40%. Suez Cement is also in talks with Egyptian authorities about the viability of a proposed wind farm project.

In May 2015, Lafarge’s Ecocem subsidiary signed two major contracts to manage and operate existing refuse-derived fuel (RDF) platforms in Suez and Qalyubeya. Lafarge Egypt and Ecocem have implemented many projects over the past three years in order to achieve an average fuel substitution rate of 25% by the end of 2015. More than 260,000t of waste has been processed and fired in Lafarge’s Sokhna plant since 2013, equivalent to 100,000t of fossil fuels.

By May 2015, 90% of Egyptian cement plants had pledged to use coal to increase their production volumes, according to Egypt’s Industrial Development Authority. Egypt’s Investment Minister, Ashraf Salman, said that US$30bn of investments in the coal industry were expected by 2020.

In June 2015, Arabian Cement commissioned new alternative fuel processing machinery at its cement plant in Suez. The FLSmidth HOTDISCTM allows Arabian Cement’s plant to rely completely on coal (70%) and alternative fuels (30%) to run its operations. The use of agricultural wastes, municipal sludge and refuse-derived fuels (RDF) is expected to reduce CO₂ emissions by 60,000t/yr.

Despite the energy crisis, the use of coal at cement and power plants has caused controversy both within the government and outside. An independent coalition, Egyptians Against Coal (EAC), was formed to advocate excluding coal use from Egypt’s energy and cement industry by 2017 due to its ‘hazardous environmental threats.’ “We are about to issue a booklet that illustrates everything related to coal use and another booklet about alternative energy resources to produce clean energy,” said Amena Sharaf, a researcher at the Egyptian Centre for Economic and Social Rights (ECESR). According to the EAC, coal use in some factories caused severe harm to its labour force. It claimed that workers ‘do not know about friendlier energy alternatives that could be used.’

China

China, as the largest producer and consumer of both cement and coal in the world, has long-standing problems with pollution in many of its cities. Closing coal-fired power plants is seen as a critical step in addressing pollution in China, which gets about 64% of its primary energy from coal.

Recent reports have indicated that coal use is declining in China as policy makers encourage broader use of hydroelectric power, solar and wind. The country is also pushing to restart its nuclear power programme. China’s electricity consumption in 2014 grew at its slowest pace in 16 years, according to the China Electricity Council. During the year, its coal consumption fell by 2.9% and its CO₂ emissions fell by 2%, the first decline since 2001.⁶

Despite the apparent positive changes, questions regarding the accuracy of China’s coal and CO2 statistics have been raised by global media. China pledged to close 1725 small-scale (capacity <900,000t/yr) coal mines in 2014, but internal data inconsistencies, the large number of new coal mines being opened and news articles featuring the discovery of illegal and undocumented coal mines raise doubts about the real-world implementation of its policy. In 2014 alone China opened 47.3GW of new coal-fired power plants.

In 2014, Beijing closed the first of its four large coal-fired power plants, which was owned by China Datang Corp. The second and third, owned by Guohua Electric Power Corp and Beijing Energy Investment Holding Co, were closed in March 2015. The last of its large coal-fired power plants, China Huaneng Group Corp’s 845MW plant, is due for closure in 2016. The plants will be replaced by four gas-fired stations with 2.6 times more production capacity. The closures are part of Beijing’s plans to cut its coal consumption by 13Mt/yr between 2012 and 2017. Shutting all the major coal-fired power plants in the city, reducing coal use by 9.2Mt/yr, is expected to cut CO₂ emissions by 30Mt/yr according to analysts.

China’s mammoth cement sector includes at least 803 cement plants and 1.48Bnt/yr of integrated cement production capacity, according to the Global Cement Directory 2016. This constitutes around 39.4% of global integrated cement capacity. China consumes correspondingly massive amounts of coal, the primary fuel source of Chinese cement plants. However, signs of cement overcapacity were noted back as far as 2003.

In October 2013, China’s State Council issued the ‘Guideline to tackle serious production overcapacity,’ while the Chinese Cement Association (CCA) drafted a plan to promote mergers and acquisitions to eliminate out-dated capacity and increase the industry’s concentration ratio. A reduction in plant numbers and capacity would automatically reduce Chinese coal consumption.

Significant industry consolidation took place in 2013 - 2015. By the end of the period, China’s top 10 cement producers had 52% of the market share. Several regions banned the construction of new cement plants, including Beijing in March 2014 and Tianjin in April 2014. Beijing also banned the expansion of existing cement plants. In addition, China’s National Development and Reform Commission (NDRC) introduced a nationwide ban on 32.5 grade cement production with effect from December 2015. This alone is expected to reduce China’s cement capacity by 340Mt/yr, or around 11%.

In December 2014, the CCA and the provincial governments ordered 103 cement lines in the northeastern provinces of Heilongjiang, Liaoning and Jilin to close for four months from 1 December 2014 to reduce overcapacity and curb air pollution. The CCA said that the winter stoppage would reduce pollution as fuel consumption increases markedly when temperatures drop. Some 20Mt of coal is required for cement production in the north of China in the winter, but this drops to 16Mt in the summer. Cement plants in north China produce cement at full capacity in the winter when energy supplies end and building operations start. However, in the summer, many operate at 50% capacity due to the oversupply of cement on the market. The overlap of cement production and energy supply in winter increases coal consumption and leads to ‘haze weather.’ A year later, in November 2015, China’s Ministry of Industry and Information Technology (MIIT) tasked cement companies in north China to again carry out peak-shifting production in the winter.

In January 2016, new environmental regulations were launched in China to improve air quality. A three-year ban on new coal mines and a clean coal action plan that will end coal burning in urban areas from 2020 are expected to improve air quality. “China needs to better manage small-scale coal burning, which accounts for 30% of total coal consumption, and cut the number of coal mining firms, currently at over 6000, by half,” said Yang Fuqiang, a Senior Advisor with the National Resources Defense Council in Beijing. “We estimate that coal consumption will drop by 2.5 - 3% in 2016.” Tighter pollution controls are also expected to be announced in the new five-year plan, which is due in March 2016. In addition, following regional trials in 2014-2015, nationwide CO2 trading is due to commence in 2017.

Nigeria

In August 2014, Dangote Group invested US$250m in a 54MW coal-fired power plant in Gboko, Benue, Nigeria to reduce the cost and difficulty of accessing electricity. Dangote Group’s CEO, Devakumar Edwin, said that the group was also working towards installations at Ibeshe, Ogun and Obajana, Kogi. Edwin, who said that the group was currently importing coal from South Africa, revealed that it was also exploring coal extraction opportunities in Nigeria, especially in Enugu. He noted that inadequate power supply due to Nigeria’s low supply of gas had affected cement production, while the high costs had impacted on the economy and increased costs for consumers. “In this country, the major issue is power,” said Edwin. “With affordable power, people will make products locally, will gravitate to the private sector, which will lead to the creation of a middle class and more employment.”

Tanzania

In October 2015, Nigeria’s Dangote Cement signed two agreements that will enable its cement plant in Tanzania to generate 150MW of electricity from coal. It also signed a coal prospecting licence for a site in Mbinga. The plant will run on diesel until it is able to generate its own electricity from coal. The deals end a year-long dispute between the government and Dangote Cement after the Tanzania Electric Supply Company (Tanesco) failed to provide electricity. The plant plans to import coal from South Africa, which is a cheaper option than buying it locally.

United Kingdom

In March 2015 the UK Environment Minister Mark H Durkan and Devendra Mody, Industrial Director at Lafarge Tarmac, signed an agreement allowing the use of refuse-derived fuels (RDF) at Lafarge Tarmac’s cement plant in Cookstown, Northern Ireland, UK. The plant, which formerly used coal for 95% of its fuel needs, will be able to substitute 35% of its coal with RDF. “Lafarge Tarmac is committing significant investment in the environment,” said Durkan. “In addition to the many environmental benefits, it will reduce its CO2 emissions from cement production by a minimum
of 10%.”

Philippines

In the Philippines in June 2015, Pasig City’s government launched ‘the largest facility in the Philippines for turning rubbish into fuel, capable of processing 600t/day of trash.’ Coal is currently the primary fuel used at cement plants. The facility, which is a joint project between Pasig City, IPM Construction & Development Corp (IPM) and the Metro Manila Development Authority (MMDA), can process almost all of the city’s daily waste production into refuse-derived fuel (RDF). Pasig City Mayor, Maribel Eusebio, said that the RDF would be supplied to cement plants for use in place of coal.

Looking to the future

Regulations that seek to protect the environment from the negative impacts of coal combustion are of the utmost importance in the face of climate change and resource depletion. In 2015, a number of key global environmental initiatives that will affect the global coal and cement industries were concluded. How these will reduce the demand for coal, including from the cement sector, remains to be seen.

United Nations General Assembly

In September 2015, the United Nations General Assembly adopted the 17 Sustainable Development Goals and 169 targets,⁷ which aim to ‘protect the planet, end poverty and ensure global prosperity.’ The participating countries pledged to ‘working tirelessly for the full implementation of this agenda by 2030.’ The energy industry and the construction sector will play a key role in several of the 17 goals:

• Ensure access to affordable, reliable, sustainable and modern energy for all;
• Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation;
• Make cities and human settlements inclusive, safe, resilient and sustainable;
• Ensure sustainable consumption and production patterns;
• Take urgent action to combat climate change and its impacts (taking note of agreements made by the UNFCCC forum).

Despite the environmental harm it causes, coal, as the most affordable source of energy, will play a key role in the continual development of emerging and developing market countries, particularly fast-growing regions in Asia and Africa.

OECD export credits

In November 2015, the Organisation for Economic Co-operation and Development (OECD) agreed new rules on support for coal-fired power plants.

The new agreement encourages exporters and buyers of coal-fired power plants to move towards high-efficiency technologies. It removed support for large (>500MW) super and sub-critical coal-fired power plants and enabled support for small (<300MW) sub-critical plants in developing countries and for medium (300 - 500MW) super-critical plants in countries with energy poverty. The new support restrictions do not apply to power plants with operational carbon capture and storage (CCS) systems. The agreement, which is subject to the completion of the European Union internal decision making process, will come into effect from 1 January 2017.

“After two years of intense negotiations, the agreement represents a first important step towards aligning export credit policies with climate change objectives to achieve lower emissions,” said Pekka Karkovirta, Vice President for International Relations in Finland’s export credit agency, Finnvera, and Chairman of the Participants to the Arrangement.

The Paris Agreement

In December 2015, the 2015 United Nations Climate Change Conference (COP21) concluded with the creation of the Paris Agreement, which governs CO₂ emissions reduction measures from 2020 via a combination of mandatory and voluntary statements that apply to almost 200 countries. These included:

• To effect a peak in greenhouse gas emissions as soon as possible and achieve a balance between sources and sinks of greenhouse gases in the second half of this century;
• To keep global temperature growth ‘well below’ 2°C and to pursue efforts to limit it to 1.5°C;
• To review progress every five years;
• To provide US$100bn/yr in climate finance to developing countries by 2020, with a commitment to further finance in the future.

At COP21, the global cement industry reaffirmed its commitment to help tackle climate change by releasing action plans to reduce CO₂ emissions by 1Bnt by 2030, compared to business as usual. “Cement production accounts for approximately 5% of worldwide man-made CO₂ emissions. This collective effort by the cement industry to mitigate its emissions is highly encouraging and showcases the importance of leadership and collaboration in making the transition to a low carbon economy,” said Peter Bakker, President and CEO of the World Business Council for Sustainable Development (WBCSD).

Attempts at forecasting

Taking the above into account, the IEA expects global coal demand to grow by 0.4%/yr and account for 30% of global electricity production by 2040. Although coal consumption is expected to grow slowly for the foreseeable future, growth will be unevenly distributed. Higher coal consumption will be reported in rapidly-developing emerging market economy countries such as India.

In developed market countries, coal consumption will continue to fall as pressure from regulators prompts the conversion to more environmentally-friendly alternatives, such as renewable and nuclear energy sources. Coal consumption in the cement industry will continue to vary according to market prices and availability and, as for other uses, will be more prevalent in developing markets than mature ones. Even with the rise of alternative fuels and low oil and gas prices, it is clear that coal will have a very large role to play in the most-rapidly growing cement industries, including those in Africa and the Middle East. The United States, which is seeing strong resurgence in its cement sector at present, is also a strong user of its domestic coal.

Cement demand for coal in the long term

To estimate how much coal will be required by the cement industry at a given point in the future, it is first necessary to estimate future cement demand. However, simply extrapolating recent growth rates is unadvisable, due to the recent anomalous behaviour of China. Chinese growth, which has recently been typified by wild over-construction, is by far the largest single factor behind rising global cement consumption over this period (Figure 3).

A more likely outcome is a gradual reduction in the rate at which new production will be demanded in the coming years. A better growth ‘baseline’ to take, therefore, might be that seen in the period between 1983 and 2003. Over this 20-year period, Chinese growth was far more in line with trends seen in other countries today and production was added at an average of 42Mt/yr. If we extrapolate this growth rate from present, we arrive at
5.7Bnt/yr of cement produced in 2050, the time by which the COP21 agreement seeks to achieve a balance between sources and sinks of greenhouse gases.

Assuming 5.7Bnt of cement production in 2050 and 350-400Mt of coal8 used to produce 4.2Bnt of cement in 2014, we arrive at coal consumption of 475 - 540Mt for the cement industry in 2050.

However, this is not the end of the calculation. Alternative fuels, an ever-reducing clinker factor and more thermally-efficient cement production technologies will all each take a bite out of the amount of coal used.

Alternative fuels: As developed markets, such as Europe, currently have the highest levels of alternative fuel use, the extent to which alternative fuels will reduce demand for coal from the cement sector by 2050 will depend on uptake in markets that are currently developing.

The 34 year period to 2050 is similar in length to the time that European cement producers have already used alternative fuels. The CSI states that, in 2012, European cement producers had an average alternative fuel substitution rate of around 35%.⁹ If the entire global cement sector achieves this substitution rate on average by 2050, it would significantly reduce the amount of coal (and other fossil fuels) required. In reality, this substitution rate may be a little bit high, given that EU legislation and economic factors drove the adoption of alternative fuels very strongly in that region. In light of this, we estimate that 25% is a reasonable estimate for a global alternative fuel substitution rate for 2050.

This 11% change in alternative fuel substitution rate will reduce the amount of coal required by the cement sector by 2050 by around 12.8% relative to the CSI’s 2012 level of 14%. (For the sake of this calculation we have defined ‘coal’ as any non alternative fuel used by the cement sector).

Clinker factor: The use of alternative cementitious materials reduces the amount of clinker required to produce cement, and hence reduce the amount of fuel to produce the cement, whichever fuel is used. Their inclusion saves producers money.

If we extrapolate CSI data that shows the reduction in clinker factor (from 83% in 1990 to 75% in 2012)¹⁰ forward to 2050, we anticipate that a clinker factor of around 65% is realistic for 2050. Current performance in Brazil (67% clinker factor) shows that this is technially possible. If this estimate comes to pass by 2050 the change in clinker factor will be 13.3% relative to the CSI’s data for 2012, again reducing the amount of coal needed by the sector.

Thermal efficiency: The switch from wet to dry cement production is almost complete across the global cement industry. While the advantages of this have already been felt, small incremental improvements in performance continue.

CSI data shows that heat consumption for grey cement fell from 3750MJ/t in 2000 to 3526MJ/t in 2012.¹¹ If we continue with this trend to 2050, we see a 710MJ/t reduction to around 2816MJ/t by 2050. This is below current Indian performance, which was around 3000MJ/t in 2012, representing the best-performing cement plants in the world.

In reality, some plants will be unable to reach the 3000MJ/t level, including many in established markets like the EU and North America. Due to this, we estimate an average heat consumption of around 3300MJ/t in 2050. If this improvement can be achieved, the cement sector will require 12% less thermal energy (and hence coal) by 2050.

Calculation

By combining the estimate for cement consumption in 2050 and the above anticipated improvements for alternative fuel use, clinker factor and efficiency, we can calculate the likely amount of coal required by the cement sector in 2050.

2050 cement demand estimate = 5.7Bnt
2050 cement sector coal requirement* = 475 - 540Mt
Value taken forward = 510Mt

Alternative fuels (100% - 12.8%) x 510Mt = 444.7Mt

Clinker factor (100% - 13.3%) x 444.7Mt = 385.6Mt

Thermal efficiency (100% - 12%) x 385.6Mt = 339.2Mt

Even if the cement industry grows significantly in the next 34 years, relatively minor improvements to alternative fuel rate, clinker factor and thermal efficiency may mean that the sector will actually require around the same amount of coal as it does at present ~340Mt/yr.

Some might argue that the estimate presented here represents insufficient improvement if the cement industry is to meaningfully contribute to curbing climate change. Others may accuse this estimate of being too optimistic. What is certain however is that, whatever happens to the cement industry over the next 34 years, coal will play a very important role as the primary fuel source. While other technologies and fuels may each take a small bite out of demand, the global cement sector will continue to consume vast quantities of coal.

References

1. World Coal Association
2. https://www.iea.org/bookshop/667-Coal_Information_2015
3. http://hub.globalccsinstitute.com/sites/default/files/publications/196843/global-status-ccs-2015-summary.pdf
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8. http://www.un.org/sustainabledevelopment/sustainable-development-goals/
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