Global Coal Demand On Track To Match Record

India is a key driver of coal demand growth

Soaring natural gas prices are giving rise to coal demand around the world, with consumption set to match this year the record-high from 2013, and further jump to a new all-time high next year, the International Energy Agency (IEA) said on Thursday.

The surge in natural gas prices following the Russian invasion of Ukraine has accelerated a gas-to-coal switch and has made coal more competitive in many markets, driving a rise in coal demand and coal prices globally, the agency said.

This year, global coal demand is expected to rise by 0.7% to 8 billion tons if China’s economy recovers as expected in the second half of 2022, according to the IEA’s July 2022 Coal Market Update. This is despite an economic slowdown and still uncertain recovery in China after the COVID-related lockdowns in the second quarter of 2022. If the IEA’s forecast pans out, global coal demand this year will equal the demand from 2013, when coal consumption hit a record high.

Next year, coal demand is expected to rise further, albeit slightly by 0.3%, and hit a new record high, according to the IEA. Uncertainties about this projection have increased over the past few months, the agency noted.

India is a key driver of coal demand growth this year, while China—which alone accounts for more than half the world’s demand—is expected to see growing demand in the second half of 2022. This will likely bring Chinese coal consumption for the full year 2022 to the same levels as last year. China and India together consume double the amount of coal as the rest of the world combined, the IEA says.

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China’s Coal Prices Soar To All-Time High

Secure supply “at all costs”

The world’s second-largest economy is grappling with a shortage of coal supply and a power crisis, which threaten to slow economic growth. Just last week, Chinese authorities ordered 72 coal mines in Inner Mongolia to boost production by almost 100 million tons amid an energy crunch that has seen factories shut down and prompted fears of a disruption to the global economy. China is now allowing coal mines to produce the dirtiest fossil fuel even if they have already hit their production quotas.

 

China is also said to have resorted to Australian coal once again to plug the supply hole gaping in its energy security. Last year, China imposed an unofficial ban on Australian coal imports amid a political spat between the two governments. China is scrambling for energy supply ahead of the winter, with a global shortage of natural gas and coal that has led to record-high prices of the fuels in Asia. China has also reportedly ordered its state energy companies to secure supply “at all costs” despite the rallying prices of liquefied natural gas (LNG) and coal.

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