Coal Demand Slumps in West, not East

Global coal demand dropped by 4.2% over 2015-16 to 5.357bn metric tons of coal equivalent (mtce), approaching the previous record for two-year declines set in the early 1990s, according to a report published December 18 by the International Energy Agency. It forecasts coal demand to remain "nearly flat" until 2022, which if correct would mean at least a decade of stagnation.

But the overall downward trend disguises some big rises in demand in Asia; and the growth in power generation in outright terms even though coal itself accounts for a smaller share of the total by 2022. 

Among the reasons for the drop last year were lower gas prices in Europe and the US, high carbon prices in the UK, a surge in renewables and improvements in energy efficiency and regulatory pressure in China, according to Coal 2017. 

By 2022, global coal demand is expected to reach 5.53bn mtce, the same as the average of the last five-year period, meaning that coal use will have had a decade-long period of stagnation.

The share of coal in the global energy mix is forecast to decline to 26% in 2022, from 27% in 2016. Although coal-fired power generation increases by 1.2%/yr through 2016-22, its share of the power mix falls to just below 36% by 2022, which would be the lowest level since IEA statistics began.

Demand rose in India and across many parts of southeast Asia, and shows no signs of slowing down. For instance, despite the rapid growth in renewables, Indian coal-fired power generation is expected to grow almost 4%/yr through 2022.

While India will be increasingly important to global coal markets, China will remain the key driver, depending on the country’s supply-side reforms which will be critical for coal prices in the coming years. Meanwhile, the EU, accounting today for just 6% of global demand, will become even less important. Just two countries, Germany and Poland, use over half the bloc's total.

Hard coal production in Europe outside Poland drops to marginal levels by 2022; lignite production remains meaningful in a few countries, but with a declining profile that follows power generation trends.