IEA (2023), Coal Market Update – July 2023, IEA, Paris https://www.iea.org/reports/coal-market-update-july-2023, License: CC BY 4.0
As projected in the Coal 2022 report last December, global coal demand reached a new all-time high in 2022, rising above 8.3 billion tonnes (bt). It rose despite a weaker global economy, mainly driven by being more readily available and relatively cheaper than gas in many parts of the world. The turn to coal-fired generation was further supported by overall weak nuclear power and hydropower production, contributing to a new record global high of 10 440 TWh being generated from coal, representing 36% of the world’s electricity generation, up one percentage point compared to 2021. In addition, final 2021 demand numbers for coal were revised upward, particularly in China, meaning that 2022’s increased demand was coming off an even higher base.
In China, coal demand grew by 4.6% in 2022 to a new all-time high of 4 519 Mt. Demand was higher than expected in last year’s Coal Report for two reasons. First, the calorific value (CV) of coal produced in China was lower, resulting in higher-than-expected volumes. Second, more coal than expected was gasified to produce synthetic liquid fuels, plastics and fertilizers. As a result, we estimate that coal demand for non-power uses grew by 7%, despite economic growth of only 3% and a sluggish real-estate sector.
India’s economy performed very well in 2022 with growth of 6.9%, resulting in coal demand increasing by more than 8% to a total 1 155 Mt, become the only country besides China to cross the 1.1 bt mark.
Due to an ongoing decline in coal-fired power generation, US coal demand continued its downward trajectory in 2022, dropping by about 7% to 457 Mt.
European Union coal demand increased by 0.9% to 448 Mt, driven by power generation, which offset declines in non-power uses. Coal-fired power generation was pushed up by high gas prices, and the urge to reduce gas use amid reduced Russian gas flows and low hydro output and temporary shutdowns in the French nuclear fleet. This was the second consecutive year of growth, but as anticipated, the uptick was short-lived and a steep decline is forecast for subsequent years.
Developments varied across Asia. Coal demand in Indonesia soared by about 36% to 201 Mt, surpassing 200 Mt for the first time ever and making Indonesia the fifth largest coal consumer after China, India, the United States, and Russia. The growth was driven by strong economic expansion in a country that relies heavily on coal for power generation. The steel and metallurgy sector was a source of particularly strong demand due both to direct coal use and captive power plants fuelled by coal. Nickel pig iron production witnessed especially rapid growth. The non-power sector grew by 96% to a total of about 69 Mt. Meanwhile, coal demand in Viet Nam decreased to 81 Mt (-4.2%), driven by the electricity sector, in particular higher renewable generation. Coal demand in Japan remained stable, while demand in Korea (-5.3%) and Taiwan (-6.4%) decreased despite high gas prices.
We expect coal demand grew by about 1.5% in the first half of 2023 to a total of about 4 665 Mt, backed by both an increase of 1% in power generation and 2% in non-power. We observed continued increases in China, India and Indonesia, which more than offset declines in the United States, the European Union and Japan.
In the second half of 2023, we expect a decrease in global coal-fired power generation to more than reverse the first-half gains. For the whole year, we expect demand from the power sector to be 0.4% lower at about 5 597 Mt. In the non-power sector, we expect growth to continue, reaching 2 791 Mt for the full year 2023. As a result, overall global coal demand is expected to remain flat at around 8 388 Mt (+0.4%) in 2023. Whether coal demand in 2023 grows or declines, will depend on weather conditions and on the economies of large coal consuming nations.
After three very particular years, with the Covid-19-induced shock in 2020, the strong post-pandemic recovery in 2021, and the first truly global energy crisis after Russia’s invasion of Ukraine in 2022, markets returned to more recognisable patterns in 2023: Declines in the United States and the European Union, and continued growth in Asia. The US and EU declines are driven by the power sector, with a combination of weak electricity demand and renewable energy expansion. In the case of the United States, cheap gas is also weighing on coal demand.
We estimate that China’s coal demand increased by about 5.5% in the first half of 2023, driven by a comparison effect with H1 2022 when Covid-related lockdowns weighed on the economy, and very low hydro output in H1 2023 which pushed up reliance on coal-fired power generation. In the second half, growth is expected to slow slightly, mainly due to recovering hydropower availability after last year’s drought. In total, we expect China’s coal demand in 2023 to grow by about 3.5% to 4 679 Mt, with demand from the power sector up 4.5% and demand from non-power uses growing by 2%.
Due to strong economic growth and coal reliance, India’s coal demand grew by about 5.5% in the first half of 2023. With growth in the power sector slowing down a bit in the second half, we expect a total increase of 5% for the year, totalling 1 212 Mt.
Indonesia is set to remain the fifth largest coal consumer in 2023, as economic perspectives are positive, and the power sector, the smelting sector and other industries are all expected to demand more coal.
In the United States, coal demand is continuing to decline, driven by the power sector. After contracting by about 24% in the first half, a slower decrease in coal demand is expected in the second half. Total coal demand in 2023 is expected to drop to 357 Mt. Coal demand is also again on a downward trajectory in the European Union and Japan, as well as Korea. In the first half of 2023, coal demand dropped by about 16% in the European Union and for the full year it is expected to decline by about 17% to about 372 Mt. The decrease is driven by weaker economic prospects, lower gas prices, nuclear recovery and ample power production by renewable resources. In Japan and Korea, these effects are limited, resulting in an expected demand of 179 Mt (-1.9%) in Japan and 117 Mt (-2.8%) in Korea.
In 2024, we expect global coal demand to remain stable (-0.1%) at about 8.38 bt, which remains a level never reached before 2022. In the electricity sector, we expect a decline of about 1%, due to the continued strong expansion of renewable power generation amid moderate electricity demand growth. However, we expect a small increase of around 1.5% in the industrial sector, as economic conditions improve. Those trends are very much in line with the Coal 2022 report expectations, although at a higher level given the already mentioned upward revisions for 2021. By region, Asia will grow, in particular India and Southeast Asia, offset by declines in the United States and the European Union. Demand is also declining in other mature economies such as Japan, Korea, Australia, and Canada, where coal demand peaked some years ago.
China will continue to account for more than half of the world’s coal use, with the power sector alone consuming one-third. If we add India, the global share rises to about 70%, meaning that China and India together consume double the amount of coal as the rest of the world combined. Along with recent growth in Southeast Asia, the dominance of the Asia continent is further increasing. In 2024, the share of China, India and the ASEAN region is expected to reach 76%. At the same time, the United States’ and the European Union’s share of coal consumption, which amounted to 40% three decades ago, will fall to 8% by 2024.