Quick Note #1
Xinjiang’s massive–and largely untapped–coal reserves offer China a way to continue using large volumes of coal and do so at a much lower cost than before. Xinjiang’s large and high-quality thermal coal seams often lie close to the surface and can be mined for US$25/tonne or less. This is much lower than the production costs in the underground mines of Shanxi, where it can cost US$45 per tonne or more to bring coal to market.
As Shenhua and other companies move to develop Xinjiang’s coal reserves on a large scale and gain experience, it is likely that production costs will fall closer to the US$15/tonne range enjoyed by U.S. mining companies in the Powder River Basin of Wyoming and Montana–the single largest source of coal in the U.S. In a nutshell, China’s coal future lies in its vast, and oft restive West.
As Chinese miners and foreign partners such as Peabody Energy dig into these massive coal seams, expand rail lines, build mine mouth power plants feeding ultra-high voltage power lines headed into Central and Eastern China, and build coal-to-liquids and coal-to-chemicals plants, each scoop of their shovels will influence global coal, crude oil, and natural gas markets. Three recent articles from China Signpost help explain how these dynamics will unfold.
- Gabe Collins and Andrew Erickson, “Xinjiang Poised to Become China’s Largest Coal Producer: Will Move Global Coal, Natural Gas, and Crude Oil Markets,” China SignPost™ (洞察中国), No. 65 (20 September 2012).
- Gabe Collins and Andrew Erickson, “Kings of Coal to Barons of Bling? Xinjiang’s coal boom will drive sales of Bentleys, BMWs, and other “bling”,” China SignPost™ (洞察中国), No. 66 (21 September 2012).
- Gabe Collins and Andrew Erickson, “Central and Southwest China: The Key Battleground for Shale Gas and New Low-Cost Coal Supplies from Xinjiang, Mongolia, and Wyoming”,” China SignPost™ (洞察中国), No. 67 (28 September 2012).
About Us
China Oil Trader™ strives to provide a holistic, globally-oriented analysis of Chinese oil and gas issues. In doing so, we often view multiple asset classes simultaneously and assess how they interact with each other. Our ultimate goal is to provide a focused source of fresh, creative, and anticipatory research for policymakers, investors, and others interested in China’s development as an energy superpower.
China Oil Trader™ founder Gabe Collins grew up in the Permian Basin and has experience dealing with energy issues for both the U.S. government and as a private sector commodity analyst. He speaks and reads Mandarin, Russian, and Spanish. Gabe has published numerous oil and gas analyses in outlets including Oil & Gas Journal, The Naval War College Review, Orbis, Geopolitics of Energy, Hart’s Oil and Gas Investor, The National Interest, and The Wall Street Journal China Real Time Report. Gabe also co-founded the www.chinasignpost.com analytical portal. He can be reached at gabe@chinaoiltrader.com.
