* Coal consumption by utilities jumped 26 pct on year in Oct
* 1,600 MW of coal-fired power coming online in Dec
* Jan-Oct LNG imports by monopolies down 1 pct
By Osamu Tsukimori and Aaron Sheldrick
TOKYO, Nov 29 Japan is burning so much coal as
it tries to lower the cost of replacing nuclear energy that it
may see a surprise dip in imports of liquefied natural gas (LNG)
in 2013, the first in four years.
Many analysts are still forecasting a rise given that
Japan's last two nuclear power plants went offline in September,
finishing a complete shutdown of the industry started by the
March 2011 Fukushima disaster.
But under pressure from Prime Minister Shinzo Abe's
administration to improve industry competitiveness, Japan has
thrown out greenhouse emissions limits and its utilities are
burning record amounts of thermal coal.
Japan's 10 main utilities, making up half of the nation's
coal use, consumed nearly 16 percent more coal in the first 10
months compared with a year ago and imported nearly 11 percent
more. Consumption rose 26 percent in October alone.
Two new coal-fired power stations with combined capacity of
1,600 megawatts due to start commercial operations next month
will add another 3.7 million tonnes a year to demand.
Further increases should help support global coal prices
, which are down nearly 9 percent in 2013 as demand
growth weakens in top consumer China.
And weaker LNG demand from Japan, which takes in about a
third of world shipments, will help keep global prices capped
despite robust demand from South Korea and China. The jump in
Japanese imports by nearly a quarter in the two years since
March 2011 had been a prime driver in the doubling of Asian spot
benchmark prices to $19/mmbtu since then.
"It's a counterbalance," said Gavin Thompson, Wood
Mackenzie's head analyst for Asia-Pacific gas and power. "The
fact that we are seeing significantly stronger winter spot
demand in China and strong demand in South Korea - both of those
buyers are fairly welcoming of the fact that Japanese demand is
Imports of the superchilled fuel by local electricity
monopolies fell 1 percent in January-October while consumption
dropped by 1.8 percent. The monopolies account for two-thirds of
Japan's LNG usage.
The shift to coal is prompting a gas analyst at a government
affiliated energy research institute to consider revising his
forecast for record LNG use in the year through March 2014.
"Perhaps there might be a slight downward revision, although
to be honest, I feel a bit reluctant to downgrade at a time when
all the nuclear plants are shut," said Akira Yanagisawa, a
manager in the energy analysis group at the Institute of Energy
Economics, Japan (IEEJ).
In August, Yanagisawa forecast LNG imports would rise 1.7
percent to a record 88.3 million tonnes in the financial year
through March and another 1.5 percent to 89.7 million tonnes in
the year through March 2015.
Any decline from last year's record LNG imports of 87.3
million tonnes may be short-lived. Japanese utilities will start
operating 14 new gas-fired plants between April next year and
July 2015, which at full operation would consume about 5.8
million tonnes of LNG a year.
COMPELLING COST BENEFITS
With high energy imports contributing to Japan's persistent
trade gap, including 1.09 trillion yen ($10.72 billion) last
month, the cost benefits of coal over LNG are compelling.
The value of LNG imports rose 14.3 percent to 5.79 trillion
yen between January and October, compared with a fall of 0.7
percent to 961.4 billion yen for coal.
Japanese utilities are pushing hard to cut coal prices
further and diversify their sources away from Australia and
Indonesia, which together supplied almost 90 percent of Japan's
coal this year.
"Our policy is to recommend that companies not only rely on
Australia and Indonesia, but that they diversify by taking
stakes and royalties in coal development in other areas as much
as possible," said Hiroyasu Morita, a deputy director in the
coal division of the Agency for Natural Resources and Energy in
Japan's industry ministry.
The main threat to Japan's LNG demand is still a revival of
the nuclear industry, but it's not clear when or even if this
Prior to Fukushima, nuclear power accounted for about 30
percent of electricity and the government had planned to
increase that ratio to 50 percent to keep a lid on emissions
targets. Japan may have only four nuclear reactors back
operating by March 2015, according to the IEEJ.
($1 = 101.7000 Japanese yen)
(Additional reporting by Rebekah Kebede in PERTH, Florence Tan
and Jane Xie in SINGAPORE and James Topham in TOKYO; Editing by