Global coal demand is expected to remain largely stable through 2024 and 2025, as growing electricity needs in major economies counterbalance the gradual recovery of hydropower and rapid growth in solar and wind energy, according to the International Energy Agency’s (IEA) latest update on global coal market trends.
In 2023, global coal consumption surged by 2.6%, reaching a record high. This rise was predominantly driven by significant increases in coal use in China and India, the world's largest coal consumers. The IEA's Coal Mid-Year Update highlights that the increase in coal demand was mainly due to the need to compensate for low hydropower output and the sharp rise in electricity demand.
In China, which accounts for over half of global coal consumption, hydropower generation is recovering in 2024 from the exceptionally low levels seen last year. This, coupled with the continued rapid expansion of solar and wind energy, is significantly curbing the growth of coal use in 2024. However, a forecasted 6.5% annual increase in China's electricity demand makes a decline in the country’s coal consumption unlikely.
India's coal demand is expected to slow in the latter half of 2024 as weather conditions normalize. In the first half of the year, India's coal consumption rose sharply due to low hydropower output and a significant spike in electricity demand driven by extreme heatwaves and robust economic growth.
Europe continues its long-term trend of reducing coal use, primarily due to emissions reduction efforts in power generation. After a more than 25% drop in coal power generation in 2023, the European Union is expected to see a nearly equivalent decline this year. The United States has also seen a significant reduction in coal use in recent years, but increased electricity demand and reduced switching from coal to natural gas may slow this trend in 2024. Meanwhile, Japan and Korea are gradually reducing their reliance on coal, although not as rapidly as Europe.
Keisuke Sadamori, IEA Director of Energy Markets and Security, stated that global coal demand is likely to remain broadly flat through 2025 based on current policy settings and market trends. The rapid deployment of solar and wind energy, along with the recovery of hydropower in China, is putting significant pressure on coal use. However, the electricity sector is the main driver of global coal demand, and strong growth in electricity consumption in several major economies is sustaining coal use. Without such rapid growth in electricity demand, a decline in global coal use would be evident this year. Structural trends suggest that global coal demand is approaching a turning point and will start declining soon.
On the supply side, global coal production is anticipated to decrease slightly in 2024 after experiencing steady growth the previous year. In China, coal production is slowing after two years of significant growth, while India continues to push for increased coal production, expecting a supply increase of around 10% in 2024. In advanced economies, coal production is declining in line with reduced demand.
Despite a collapse in coal imports in Europe and a decline in imports in Northeast Asia (Japan, Korea, and Chinese Taipei) since 2017, global coal trade volumes are at record highs, as other countries step in to absorb available supply. Vietnam is poised to become the fifth largest coal importer in 2024, surpassing Chinese Taipei, while imports to China and India remain at record levels.
Despite a reduction in domestic coal production in China in the first half of 2024, tighter sanctions on Russian producers, and disruptions in some exporting countries, the global coal market remains well-supplied. Coal prices remained within a range in the first half of 2024, stabilizing to levels seen before the global energy crisis but remaining elevated due to inflationary pressures.
