Energize Weekly, December 30, 2020
Coal demand slipped an estimated 5 percent in 2020 – the largest annual decline since the Second World War – but the fuel is projected to rebound in 2021 on demand from China and Asia, according to the International Energy Agency (IEA).
The 2020 decline follows a 1.8 percent drop in coal demand in 2019, the result of weak electricity demand and low natural gas prices.
China and Southeast Asia posted significant growth in coal-fired electricity generation in 2019, but it was not big enough to offset declines elsewhere.
The nearly 7 percent two-year drop in coal consumption – more than 500 million tons – is unprecedented in the 49 years IEA has kept records.
Global electricity generation increased by 1 percent in 2019, the lowest rate since 2009. European natural gas prices fell by two-thirds in 2019, under pressure from liquified natural gas imports, and gas prices were 30 percent lower in the U.S. than in 2018.
In 2020, global electricity demand is estimated to drop 1.5 percent – the largest decline in IEA records, while global coal-fired power generation dropped 5.2 percent, the largest decline in decades.
The weak economy, hobbled by the novel coronavirus pandemic, led to 2020 coal consumption for both electricity generation and industrial being down.
“Except for China, industrial output has been severely subdued by the COVID-19 crisis,” IEA said. “In China, switching away from small coal boilers for air quality reasons continues. Both of these factors weighed on non-power coal demand in 2020.”
In 2019, China had also seen a 1 percent increase in coal consumption spurred by the growth in coal-fired power generation and increased steel production.
Global coal demand is projected to rebound by 2.6 percent in 2020 – led by China, India, and Southeast Asia – and to continue to increase through 2025.
Growing electricity demand and higher natural gas prices could also lead to a slowing in the decline of coal in the European Union, In the U.S., coal could post a temporary uptick in 2021, the first increase in decades.
By 2025, global coal demand is forecast to flatten out at around 7.4 billion tons as coal in the Europe Union and North America continues its decline after the 2021 bounce.
The EU and the U.S. now make up about 10 percent of global coal use so declines in these markets will have limited impact on global consumption.
China and India are the two most coal-reliant major countries. Chinese coal demand is projected to reach a plateau, while India and several counties in Southeast and South Asia are forecast by IEA to increase coal consumption through 2025.
Asian demand is being driven by expanding industry production and new coal-fired generation coming online.
By 2025, the ten member countries of the Association of Southeast Asian Nations (ASEAN) will become the third-largest coal-consuming region, surpassing the United States and the European Union.
The international coal trade was hard hit in 2020 by the COVID-19 crisis. Exports declined by about 11 percent, with more than two-thirds of the decline coming from thermal coal.