2 April 2013 – CLSA issues report titled “Water for coal: Thirsty miners will share the pain” examining the risks for coal as China’s waterscape changes. China Water Risk guest authored this report for CLSA U^®

The report warns:

• Exposure to water risk has risen significantly for coal over the last decade with the majority of China’s coal bases now located in medium to extremely high risk zones;
• Coal extraction and production is water intensive, yet over 50% of the country’s coal reserves are located in water scarce regions:

• Around 95% of China’s coal is mined underground with heavy reliance on groundwater use;
• Given new government water quotas and focus on protecting groundwater, the report looks at whether the groundwater-reliant North can sustain a ramp up in coal product to 4bn tonnes by 2015;
• Analysis also show many listed mining companies covered have single to multi-province exposure to water scarce and water stress regions;
• Pollution could be the new canary in the coal mine: IPE pollution database search surfaced multiple violations for some listed miners across multiple years from 2003-2012;
• Whole coal-chain could be at risk. More than half of China’s industrial water usage is used in coal related industries – from coal mining to preparation, coal-fired power generation, coke production and the coal-to-chemical industry.

The report recommends that “coal and coal-related industries as well as providers of capital to such sectors, whether in equity or credit, factor in water risk in China”

Click here to access the report

Please note that the report is accessible to professional investors only. We shall review it in our May newsletter. Sign up here for our newsletter.

CLSA Contact:

Charles Yonts, Head of Sustainable Research

[email protected]