The dry bulk industry faces significant reductions in seaborne coal trade if efforts to curb global warming prove successful.

A new report by Wood Mackenzie shows a 40% fall in trade in thermal coal if the temperature of the world rises by only 2°C.

The report comes in the wake of the US and China formally ratifying the COP21 Paris climate agreement at the recent G20 summit in China.

Wood Mackenzie believes the reduction in trade in thermal coal could see shipments fall from an estimated 900mt for 2016 to 527mt by 2035.

“Our proprietary modelling suggests seaborne import demand to shrink by 40% by 2035,” says Prakash Sharma, research director of global coal markets for Wood Mackenzie.

“Asia, Europe and the Americas will import 433, 80 and 15mt, respectively, in 2035 from 673, 170 and 39mt, respectively, estimated for 2016.”

Wood Mackenzie’s analysis of the IEA 450 Scenario also shows that a 2°C limit on temperature rise would mean a sharp reduction in the share of coal-fired generation from 41% in 2013 to 16% by 2035.

The IEA 450 Scenario for 2035 is based on massive improvements in energy efficiency and an increased share of nuclear, renewables and gas in supplying power.

It assumes that carbon capture and storage will become commercial post-2020 and will potentially support 980mt thermal coal consumption in 2035.

“The IEA 450 Scenario presents a bearish coal import outlook for Japan, South Korea, Taiwan and Southeast Asia, where domestic reserves are either non-existent or exhausting. China and India have options to support domestic coal industry and restrict imports,” says Wood Mackenzie.

“Our analysis suggests demand for high-energy bituminous coals will be more resilient compared with low energy lignite-type coals.

“As a result, we expect Australian exports to fall more slowly than the rest. Australian exports will decline from 210mt in 2016 to 135mt by 2035.

“In comparison, Indonesian exports will decline from 340mt in 2016 to 193 by 2035. Colombia, Russia and South Africa combined will export less than Australia in 2035,” Sharma explains.