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Asian thirst for coal offsets progress in Europe, IEA says

Continued “strong growth” in coal use in Asian economies offsets declines in Europe and North America and is expected to keep global coal consumption at record levels following an all-time high use in 2022, according to a new International Energy Agency (IEA) market update (27 July).

In 2022, coal consumption rose by 3.3 per cent to 8.3 billion tonnes, setting a new record, according to the IEA’s mid-year Coal Market Update, which was published on Thursday. In 2023 and 2024, small declines in coal-fired power generation are likely to be offset by rises in industrial use of coal, the report predicted, although there are wide variations between geographic regions.

China, India and Southeast Asian countries together are expected to account for 3 out of every 4 tonnes of coal consumed worldwide in 2023. In the EU, growth in coal demand was minimal in 2022 as a temporary spike in coal-fired power generation was almost offset by lower use in industry, according to the report.

European coal use is expected to fall sharply this year as renewables expand, and as nuclear and hydropower partially recover from their recent slumps. In the United States, the move away from coal is also being accentuated by lower natural gas prices.

Coal markets have thus far returned to more predictable and stable patterns in 2023, IEA said. Global coal demand is estimated to have grown by about 1.5 per cent in the first half of 2023 to a total of about 4.7 billion tonnes, lifted by an increase of 1 per cent in power generation and 2 per cent in non-power industrial uses.  

By region, coal demand fell faster than previously expected in the first half of this year in the United States and the EU – by 24 per cent and 16 per cent, respectively. However, demand from the two largest consumers, China and India, grew by over 5 per cent during the first half, more than offsetting declines elsewhere, IEA noted.

“Coal is the largest single source of carbon emissions from the energy sector, and in Europe and the United States, the growth of clean energy has put coal use into structural decline,” said Keisuke Sadamori, IEA Director of Energy Markets and Security. “But demand remains stubbornly high in Asia, even as many of those economies have significantly ramped up renewable energy sources. We need greater policy efforts and investments – backed by stronger international cooperation – to drive a massive surge in clean energy and energy efficiency to reduce coal demand in economies where energy needs are growing fast.”

After the extreme volatility and high prices of last year, coal prices fell in the first half of 2023 to the same levels as those seen in the summer of 2021, driven by ample supply and lower natural gas prices. Thermal coal returned to being priced below coking coal, and the big premium for Australian coal narrowed following the easing of disruptive La Niña weather that had hampered production.

Russian coal has found new outlets after being barred in Europe, but often at considerable discounts, IEA’s report noted.

Cheaper coal has made imports more attractive for some price-sensitive buyers. Chinese imports have almost doubled in the first half of this year, and global coal trade in 2023 is set to grow by more than 7 per cent, outpacing overall demand growth, to approach the record levels seen in 2019, the report’s authors predicted.  

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