The USA, China, India and Germany derive almost half, if not closer to three quarters, of their electricity from coal. Those 4 countries make up more than half the world's population and close to 50% of the world's GDP.
EIA (Energy Information Administration) has forecasted that global coal consumption in the electric power sector will grow by 6 percent in 2010, due to the result of higher electricity consumption.
How can this be with all the renewable energy efforts across the globe?
Coal is the cheapest source of energy that exists; it is convenient, found all over the planet and the vast majority of the world has the available technology and capital to mine it. The second part to the answer is that no one could have predicted the speed at which the emerging markets have risen and the demand for cheap energy which has come along with that growth.
Before we talk about the global demand trends for coal and the amazing growth set to occur within this sector, let's refresh on what types of coal exist and the primary uses.
Coal has many important uses worldwide; the most common being electricity generation, steel production and cement manufacturing. Roughly 5.9 billion tonnes of hard coal was used worldwide in 2009. There was 909 million tonnes of brown coal used that year.
Our team at Pinnacle expects a very strong M&A (merger and acquisition) market for coal in the coming decade. China recently revealed a 3.8 billion tonne increase in coal demand by 2015. Remember that the entire worldwide consumption was 5.9 billion tonnes of hard coal in 2009, along with 909 million tonnes of brown coal. China alone has plans to increase global consumption by more than 50% in 4 years!
This is a staggering statistic and one that can't be overlooked by investors.
Global coal consumption has grown faster than any other energy source since 2000.
The reason global coal consumption has surpassed all other sources of energy since 2000 can be summed up in two words: Emerging Markets. The emerging markets have exploded in economic production and are attributing for more and more of the globe's GDP total each year. To emerging market nations, such as India, China and Brazil, coal represents the only near-term, feasible, economically sound way to provide energy to its growing cities and citizens. It's not rocket science. Even the United States currently derives roughly 50% of its electricity from coal. It is cheap and available; put simply, no renewable energy can compete with coal.
China is at the heart of global coal demand. China is also scared that it won't have enough coal or enough energy to fuel its expanding economy. The good news for coal investors and a trend we plan on taking advantage of, is that it's becoming evident China will pay anything to quench its energy demand.
Note: All references to other stocks, other than AMPW will be deleted. Period!