In an updated coal market report published on Thursday, the International Energy Agency (IEA) said that the global coal demand could reach 8 billion tons in 2022, matching a historic high set in 2013.
The agency also said that the demand for coal will continue to grow in 2023.
Read also; Guinness Nigeria Plc to pay N7.14k Final Dividend for financial year ended June 2022
The July 2022 coal market update provides the IEA’s latest analysis of global coal demand, trade and prices, as well as updated forecasts through 2023.
“Based on current economic and market trends, global coal consumption is forecast to rise by 0.7% in 2022 to 8 billion tons, assuming the Chinese economy recovers as expected in the second half of the year… This global total would match the annual record set in 2013, and coal demand is likely to increase further next year to a new all-time high,” the report states.
According to the agency, demand is being driven up by rising natural gas prices, forcing many countries to increasingly switch from gas to coal and reopen previously closed coal-fired power plants.
The report states that China, which is “responsible for more than half of global coal consumption,” will be the main driver for the growth in demand in the second half of 2022, despite seeing demand drop by 3% in the first half of the year. The Chinese demand for Coal is expected to remain stable at 4230 Mt for the whole of 2022, on an assumption that the Chinese economy recovers in third and fourth quarters from the substantial slow down in the second quarter.
Demand for coal in India is also expected to rise due to the country’s economic growth and more widespread use of electricity. It is estimated that the demand for coal-fired power generation will see a 7% increase in coal consumption to 77 Mt in 2022 compared with 2021.
The EU is also forecast to contribute to demand, as it is increasingly turning to coal in electricity production to replace gas or save it for the winter due to the decline in Russian gas imports. It is estimated that the EU’s coal consumption will see a 7% year-on-year increase to 476 Mt in 2022.
The IEA adds that the coal markets will remain volatile in 2023, especially after the EU coal embargo comes into effect, and prices may continue to grow well into next year.
“As soaring natural gas prices have made coal more competitive in many markets, international coal prices have risen in turn, hitting three all-time peaks between October 2021 and May 2022. Sanctions and bans on Russian coal have disrupted markets, and issues in other major exporters have contributed to supply shortages. With other coal producers facing constraints in replacing Russian output, prices on coal futures markets indicate that tight market conditions are expected to continue well into next year and beyond,” the IEA states.
Global coal consumption is currently forecast to be little changed in 2023 compared with 2022. Forecast is for global coal consumption to increase slightly by 0.3% to 8 032 Mt in 2023. But economic, weather and/or market developments could easily turn this small increase into a decline.
China’s coal consumption is expected to increase by 1%, or 43 Mt, in 2023, assuming China’s GDP growth is lower than in recent years. Given the wide use of coal across the economy, this forecast is subject to many uncertainties, such as economic growth, hydropower output or the evolution of heavy industry.
Coal demand in India is expected to increase further, driven by expanded electrification and economic growth. In our forecast, Indian coal demand grows by 3% to 1 160 Mt in 2023.
The near future for EU coal consumption is very uncertain, given the volatile situation with Russian gas flows. In our forecast, the expansion of renewables and energy saving measures in 2023 are enough to offset expected nuclear power plant closures. Assuming a higher availability of nuclear power plants in France than in 2022, we forecast a decline of 4 Mt in EU coal demand in 2023.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur