China, India set to boost global coal demand to all-time high
03:40, 20 December 2021
Global coal demand is forecast to hit a new all-time high in the next two years driven by robust energy demand from China and India despite pledges for net zero emissions.
The International Energy Agency’s (IEA) 2021 Coal report, released on Friday, forecast that coal demand will surpass its 2013 record in 2022 at 8,025 million tonnes and rise to an all-time high of 8,031 million tonnes in 2024, driven by consumption from China, India and Southeast Asia.
“The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action,” the IEA said in its report.
Economic growth
China’s coal consumption growth is expected to average less than 1% a year between 2022 and 2024, adding 135 million tonnes in the period. In India, stronger economic growth and increasing electrification are forecast to drive coal demand growth of 4% a year. The South Asian country is set to add 130 million tonnes to global coal demand between 2021 and 2024.
The forecast assume that global gross domestic product rises at 4% compound annual growth rate from 2022 to 2024.
“If the economy does not perform as expected, especially in China, it will clearly affect coal consumption,” the IEA said. China and India account for a combined two-third of global coal consumption.
Another critical forecast assumption related to gas prices. Coal and gas are the main competitors in the electricity market to fill what is known as the “thermal gap”. The thermal gap is the difference between electricity demand and the amount produced from nuclear and renewable sources.
Changes in coal consumption by region, 2021-2024 – Credit: IEACoal-fired plants hit all-time high
A combination of declining global electricity consumption and low natural gas prices caused coal-fired power generation to drop by 3.8% in 2020. Subsequently, demand for both steam coal and lignite, a lower carbon form of coal, dropped by 3.6% and 13% respectively.
For 2021, the IEA forecasts global coal-fired power generation to increase 9% reaching an all-time high of 10,350 terawatt-hours (TWh) with electricity demand outpacing low-carbon supply and a steep increase in natural gas prices. However, coal’s share in the global power mix in 2021 is expected to be 36% – five percentage points below its 2007 peak.
The agency forecasts global electricity demand to rise by 6% in 2021, exceeding the 2019 level as economic recovery around the globe and adverse weather conditions boost demand at the same time, renewable power generation is lower than expected due to meagre rainfall and weak wind in some regions.
Additional global power demand and generation by source, 2020-2024 – Credit: IEAGas up, coal stable
For 2022-2024, global power demand is expected to increase around 2,099 TWh with annual average growth of 2.4%. About 91% of the demand will be covered by additional renewable electricity generation. The expected gap of 220 TWh will be filled by coal- and gas-fired power generation.
“With forward prices pointing to a gas price drop, we expect gas to meet most of the remaining demand while coal-fired power generation stays stable over the period,” the IEA said.
The IEA estimated coal-fired power generation will increase 4.1% in China between 2021 and 2024 , 11% in India and 12% in Southeast Asia. Meanwhile, coal-fired power plants may return to declining trajectories in the US (-21%) and European Union (-30%).
Regional and global coal production changes, 2019-2024 – Credit: IEAOutput set to rise
The IEA forecasts global coal production will grow by 4.5% to 7,889 million tonnes in 2021 after a decline of 4.8% at 7,560 million tonnes in 2020.
In response to coal supply shortages, large coal-producing countries such as China, India, Indonesia and Russia are expected to boost efforts to expand their output.
The agency forecast global coal production to reach all-time high in 2022 at 8,111 million tonnes with the biggest increase in India, China, Russia and Pakistan. In 2024, global coal supply is expected add 125 million tonnes at 8,014 million tonnes in 2024.
Read more: Сoal market forecast: will thermal coal price rally end?
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