Thermal coal, which is the cheapest and most common type of coal, is burned to generate steam that powers turbines and produces electricity for either public grids or for large-scale industrial use. Metallurgical coal, on the other hand, is used as a fuel and as a reducing agent (coke) for smelting iron ore in a blast furnace; as such, it is also often referred to as coking coal or steelmaking coal. Metallurgical coal needs to be low in sulphur and phosphorus so these elements do not migrate to the metal during steel making.
Coal is mined in over 100 countries, and on all continents except for Antarctica. The largest reserves are found in the USA, Russia, China, India and Australia. The world’s largest coal producers are China (48%) and the United States (15%) and almost all production is used for domestic needs. On the export side, Australia (26%) is the largest exporter of coal followed by Indonesia (24%). But Indonesia may not be a reliable source of inexpensive coal. Power projects that had planned to get coal from Indonesia are yet to find a solution to a new law that may effectively increase the cost of Indonesian coal. The new regulation says coal sold from the country is to be indexed to the international price and revised annually.
After the earthquake in Japan, some investors are looking towards coal to “pick-up the slack” associated with the possibility of decreased energy output caused by the reduction of nuclear energy programs around the world. But some think this is simply a temporary blip on the energy radar as many countries will reinstate nuclear power as key energy source once the public’s concern subsides.