Fuel Minerals: A review and forecast of uranium and coal

The Canadian coal industry experienced a difficult year in 1990. Preliminary statistics indicate that production, consumption and imports will be down compared with 1989. Exports, however, appear to have held their own, or to have marginally increased. Exports are forecast to reach 33 million tonnes (t) in 1990, up 1% over 1989, reflecting increased shipments of thermal coal. Imports should be about 13.7 million t, down 7%, while domestic consumption is expected to fall by 9% to 49.2 million t.

Nevertheless, the year ended on an inauspicious note for some exporters who saw their fiscal year 1991 price and volumes reduced to their largest and most important customer, the Japanese steel industry. Exporters continued to feel the effects of nearly a decade of declining prices for their metallurgical coals.

The domestic production and consumption segment of the Canadian coal industry, on the other hand, was expanding with one new coal mine under development, one coal-fired power station commissioned and four stations under construction in 1990.

Major international events such as the Gulf crisis, with its subsequent oil price uncertainty, and the political events in Europe had little impact on the Canadian coal industry either in terms of prices or markets.

Preliminary Statistics Canada figures suggest that 1990 Canadian coal production fell by two million t or 3% to 68.5 million t, compared with 1989. (Statistics Canada defines coal production to equal shipments from a mine or preparation plant plus coal consumed at a mine.) This lower production figure primarily reflects decreased domestic thermal coal output in Nova Scotia and Saskatchewan.

Coal production is forecast to be down by about 5% in Nova Scotia in 1990 to 3.4 million t, due to a 3-week labour dispute at the Cape Breton Development Corp., which normally accounts for 95% of the provincial output. However, thermal coal consumption is estimated to have grown by about 4% to 2.3 million t, due to increased demand for the generation of electricity.

Coal currently accounts for about 75% of the electricity generated in Nova Scotia and will provide even more upon completion of the two coal-fired stations currently under construction. The 150-MW Trenton VI unit will come on stream in mid-1991, while the 165-MW Point Aconi plant is scheduled to commence operations in early 1993. These stations will use nearly a million tonnes of coal annually, some of which will come from the new Westray coal mine when it begins production in late 1991. This underground mine, near Stellarton, in Pictou County, will be capable of producing more than one million t of low-sulphur coal and employ nearly 250 miners.

Thermal coal consumption in New Brunswick decreased by 200,000 t, to 500,000 t in 1990. This reflected both reduced demand for electricity because of a slowdown in the industrial sector and unusual increases in the generation of electricity from hydro units. Consumption should increase throughout this decade, especially after the completion of a 400-MW unit near Belledune in 1993.

Ontario remained the second-largest coal-consuming province, although it too experienced a decline in coal use in 1990. Most of this decline can be accounted for by a 2.3-million-tonne decrease in thermal coal demand from Ontario Hydro. This was due to a combination of factors, including lower electricity demand and increases in electricity availability from nuclear, hydro and out-of-province sources. Coal consumption in 1990 is estimated at 10.5 million t (down from 12.8 million t in 1989) for power generation; 4.7 million t (down from 5.9 million t) for the steel industry; and nearly 700,000 t for industrial purposes. Total coal consumption in Ontario of 16 million t in 1990 will be down by 18% from 1989.

All of the coal consumed in Ontario is imported, either from the U.S. or from western Canada. In 1990, nearly 40% of the coal used by Ontario Hydro came from western Canada, while all other coal consumed in the province imported from the U.S.

Saskatchewan is a producer, consumer and exporter of lignite coal. Production in 1990 is expected to be down by 12% to 9.5 million t compared with 1989. Provincial utility demand decreased by more than one million t to 7.6 million t, due to lower energy demand and increased electricity output from hydro sources. Exports of lignite coal to other Canadian markets were also down in 1990. Demand for Saskatchewan’s lignite coal will grow in the 1990s by at least 1.5 million t to supply the new 300-MW Shand power station, which is scheduled to enter service in July 1992.

Alberta continues to be Canada’s largest coal-producing and coal-consuming province. However, for the first time in several years annual coal production and consumption decreased. Output declined by an estimated 2%, to 30 million t, reflecting decreases in both domestic and export demand. Approximately two-thirds of Alberta’s coal production is sub-bituminous coal produced for minesite power stations, while the remainder is bituminous coal for Canadian and export markets.

Most of the future growth in coal output in Alberta will occur in the sub-bituminous market based on the development of new coal-fired power stations. The 375-MW Sheerness II station was officially commissioned in November, 1990. The next generating station will be the 400-MW Genesee II, which may come on-stream as early as late 1993. These two units will increase demand for sub-bituminous coal by more than three million t annually by the mid-1990s.

Although B.C. consumes very small amounts of coal, in terms of value it is Canada’s most important producer. Production in 1990 kept pace with 1989 at about 24.8 million t valued at $1 billion. This represents 36% of the volume and 56% of the value of Canadian production. The value of B.C. coal is proportionally greater than its share of national production because most of its coal is produced for the higher-priced metallurgical coal market. B.C. coal is primarily exported to Asian-Pacific markets although some is also sold to European and Latin American customers.

Outlook

The Canadian coal industry faces important challenges in the 1990s. Coal demand is forecast to grow internationally, but primarily in the thermal market. Traditionally, only about 15% of Canadian exports are thermal coals, and these coals command lower prices than metallurgical coals. This makes this market a special challenge for Canadian exporters, because even those companies selling metallurgical coal are facing difficult financial times. A private sector review of the B.C. coal industry for 1989 documented that the industry recorded a loss of $4 million that year, making it the worst year of its last eight.

Important structural changes are under way in the Canadian industry. One coal mine changed hands in 1989 and two mines (Shell Canada’s Line Creek mine and the Byron Creek mine of Esso Resources) were put up for sale in 1990.

The Quintette mine in northeastern British Columbia (owned by Denison Mines and Japanese and French interests) is in the midst of a major reorganization, and other mines are facing important financial and market challenges.

However, Canada remains a major coal exporter, with an enviable record as one of the most secure and reliable coal suppliers in the world. The Canadian coal industry has the capacity to produce and export more coal to help meet the growing energy and raw material needs of the 1990s. Its good quality metallurgical coals and low-sulphur thermal coals should help meet domestic and international demands well into the 21st century.