Is IEA's Outlook for Global Coal Demand and Supply Unduly Optimistic?

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The fight against global warming in the Electric Power sector has long centered on the competition for market share between coal, natural gas and renewables. Electricity fuel wars largely are being waged overseas, in developing economies such as China and India. Developed economies, such as the U.S. and European Union (EU), are essentially a sideshow due to the strong growth of populations, economies and electric demand of rapidly industrializing economies.

A new report from the International Energy Agency (IEA) (Paris, France) maintains the agency's optimistic tone that renewables will continue to displace coal, and even gas, in electric generation. Perhaps the IEA, like former Secretary of State Colin Powell, believes that perpetual optimism is a force multiplier. But the IEA also hedged its bets in "Coal 2024: Analysis and Forecast to 2027," noting that 2024 likely will be a record year for coal production and demand, adding that numerous uncertainties cloud the next few years.

The IEA report combined data for all types of coal (thermal, metallurgical and lignite), though extensive tables in the appendix break out demand and production for different types of coal. Thermal coal and lignite data are combined in those tables.

Despite sharply higher prices compared to pre-COVID pandemic years, the IEA report observed that overall global coal production, consumption, trade and coal-fired power generation all set records in recent years.

Zeroing in on power generation, the "Coal 2024" report, released December 18, noted that renewables are "threatening coal's century-long supremacy in electricity generation. At the same time, accelerating demand for electricity around the world could give coal another boost." Electric demand growth in China and India are multiples of what they are in the U.S. and EU. Similarly, the population base of those developing countries dwarfs the U.S. and EU.

The report explores many variables relating to power generation and economic growth, including:

• When will coal use peak in China, the world's largest producer and consumer?
• How will India fuel its economic growth?
• How quickly will coal use decline in developed economies as they become more electrified?
• When will coal be replaced in the industrial sector?

Answers to those questions will affect the velocity and trajectory of the energy transition and the fight against global warming, though "Coal 2024" does not explore those downstream issues.

Global demand for all forms of coal is expected to grow about 1% in 2024 to an all-time high of 8.77 billion tonnes, the report said. "This represents a considerable slowdown in growth from previous years: global coal consumption rose by 7.7% in 2021 as it rebounded from the COVID shock the year before, by 4.7% in 2022 and by 2.4% in 2023."

The agency expects global coal production and use to hold steady at about 9 billion tonnes per year for the 2025-2027 period.

The report observed: "The power sector has been the main driver of (global) coal demand growth, with electricity generation from coal set to reach an all-time high of 10,700 terawatt-hours (TWh) in 2024."

China and India have dominated and are expected to continue dominating the overall consumption and production of all forms of coal, vastly outstripping annual demand from the U.S., EU and other nations.

Click on the images at right to see graphics depicting global demand for all forms of coal from 2002 with a forecast to 2027, and global production for all forms of coal from 2000 with a forecast to 2027.

Focusing on the annual consumption of thermal coal and lignite, China and India again are expected to dominate the market, far outstripping the U.S. and EU.

Click on the image at right to see a graphic comparing the use of thermal coal and lignite in the four largest markets: China, India, the U.S. and EU.

As for production of thermal coal and lignite, China and India again are far and away the leaders, outstripping the next largest producers: Indonesia, EU, Central and South America, Australia and the U.S.

Click on the image at right to see a graphic on the actual and forecast production of thermal coal and lignite for China and India, the largest producing countries in the world.

Chinese thermal coal and lignite production is expected to rise to slightly more than 4 billion tons in 2024, and hold steady at that same level for the 2025-2027 period. That may represent the triumph of optimism over experience. Meanwhile, Indian production is predicted to rise during the 2024-2027 period.

It's true that China has for years pursued an aggressive "all of the above" energy policy, making huge investments in renewables, coal and even nuclear power to meet the burgeoning electric demands of an economy where growth is slowing but still expanding at a rapid clip. Even if it uses less coal domestically, China can export its coal to other developing nations in and around Asia.

Data from Industrial Info's Global Market Intelligence (GMI) platform supports the view that China's activity in the coal business will increase in the coming years. The GMI platform is tracking 3,010 coal mining and related capital projects kicking off between January 2024 and December 2028. The total investment value (TIV) of those projects is about $183 billion. China accounts for about one-third of those projects by number, and two-thirds by TIV. Subscribers to Industrial Info's GMI Metals & Minerals Project Database can click here for the project reports.

Click on the image at right to see a graphic of the 10 countries with the largest planned capital investment in coal mining and related activities between January 2024 and December 2028.

China's slowing economy could cause the government to trim its planned investments, which are five times that of India, which plans the next-largest investment. But the siren song of exporting coal to other energy-hungry nations may be a countervailing force that keeps the investments moving forward as planned.

Industrial Info's Joseph Govreau, vice president of research for Metals & Minerals, said, "The world's developed economies have worked hard to reduce coal use in recent years, but like the arcade game of Whack-A-Mole, enormous demand growth has popped up in developing economies, more than offsetting reductions in developed economies. When demand for electricity is rising sharply, governments and utilities have no choice but to meet that demand using any fuel they can. In many cases, that fuel has been, and will continue to be, coal."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).