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Young Asian power plants good news for Aussie coal: Charts of the week

Lewis Jackson  |  26 Jul 2021Text size  Decrease  Increase  |  
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Asian demand for Australian coal will keep the dividends flowing at Australian rail freight operator Aurizon for at least another decade, writes Morningstar senior equity analyst Adrian Atkins in a new special report.

The narrow moat stock is benefiting from the soaring price of coal, which makes up 40 per cent of its freight earnings. Thermal coal is up 90 per cent since January. Demand for the world’s most controversial commodity should stay high for at least another decade thanks to Asian demand, says Atkins.

Asia has a relatively young fleet of coal power plants. Those plants will continue to need Australian thermal coal for years says Atkins. Aurizon (AZJ) will also benefit from continuing demand for the metallurgical coal used in steelmaking. Metallurgical coal accounts for most of earnings.

In Charts of the Week, we take a visual look at the age of the world’s coal power plants and coal’s place in energy generation.

Sixty-five per cent of the world’s coal-fire power capacity is less than 20 years old, according to data compiled by the International Energy Agency. Thirty-seven per cent is less than ten years old.

Coal use peaked in 2011 in China and 2016 in India, according to Ember-climate, an independent climate and energy think tank. Last year, China committed to net-zero emissions by 2060. India has yet to set a date.

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In 2020, wind and solar increased to about 10 per cent of the energy mix for both countries, but coal still generated more than 60 per cent of all energy, roughly double the world average. That installed capacity underpins continued demand for Australian thermal coal exports, says Atkins.

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is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

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