Global coal demand reached a record high in 2022, but the IEA expects demand to fall in almost all advanced economies.

In its latest Coal Market Report 2023, the IEA predicts a historic turning point is coming. Their latest projections see coal demand peaking within this decade under today’s policy settings. This would come primarily as a result of the structural decline in coal use in developed economies and a weaker economic outlook for China. The Asian country has pledged to reach a peak in CO2 emissions before 2030.

Still, the IEA says it has questions around when the peak in demand will happen and at what level. It also openly speculates just how fast the consumption of coal will decline after that point.

In a media briefing to launch the Coal Market Report 2023, Keisuke Sadamori, IEA Director: Energy Markets and Security said they expected coal to remain the largest source of electricity generation for 2023.

And, while the IEA expects global coal trade in 2023 to surpass 2019 numbers, setting a new record of 1.46 million tonnes (Mt) traded, they don’t think the record growth is going to continue.

Sadamori said declines in coal demand have occurred in the past in response to specific global conflicts or specific shocks such as the collapse of the Soviet Union, but this time they see the decline as structural, driven by an increasing number of clean energy sources coming online.

“A turning point for coal is clearly on the horizon,” said Sadamori. But the pace at which coal demand expands in Asian economies dictates what happens next.

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China’s outsized influence on global coal demand

He said the dominance of China on the coal market has no comparison as it accounts for more than half of the entire global demand. China plus India now account for 75% of global coal demand.

Still, the IEA forecasts lower demand from China in 2024, putting global coal demand on a downward trajectory. And they see coal demand declining in most mature markets such as the US and EU and coal being pushed out of the energy source market as new renewable sources come online and coal-fired power plants are decommissioned.

While coal is widely used across China’s economy, as well as directly in power plants, (one out of three tons of coal consumed around the world is burned in a coal-fired power plant in China) the IEA expects their wind and solar power plants to increase significantly over the next few years, leading to a decrease in the use of coal-fired plants.

Also, the contraction of China’s real estate market will create less of a demand for cement and steel, again leading to less use of coking coal. Still, the IEA will be monitoring China’s economy closely as any slowdown or acceleration will have a significant impact on coal demand.

Sadamori said the IEA sees coal demand reaching a new all-time high in 2023, but for the first time since they started publishing a coal market report, they do now forecast a decline in demand from 2024 to 2026.

“For almost ten years there wasn’t a clear trend, just a plateau after exceptional growth of the first decade of the century. This report shows things are changing.”

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Coal demand in South Africa

The IEA says coal consumption in Africa decreased by 4.4Mt in 2022, to a total of 187Mt because of persistent issues with Eskom’s coal plant fleet. The decrease was modest though because consumption was already at reduced levels in the aftermath of the COVID-19 pandemic.

Economic activity in Africa was mostly stagnant in 2023 and loadshedding in South Africa continued to drag down the country’s, and by extension the continents’, coal demand.

The IEA forecasts a U-turn on the continent’s coal consumption trend for the period to 2026 though, with total demand increasing to 193Mt over the next three years. They forecast better performance from Eskom’s coal-fired power stations to justify that increasing number.

While they point out that 84% of Africa’s coal consumption in 2022 came from South Africa and the poor performance of Eskom’s coal-fired power stations created a further decrease in coal demand, the IEA still sees this demand remaining in place for a while.

Eskom’s Just Energy Transition Project, funded by the World Bank, was meant to start with the decommissioning of the 56-year-old Komati coal plant. “however, given the critical supply situation, South Africa’s climate policy body recently suggested delaying the retirement of coal plants without specifying a timeline.”

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As for the rest of Africa

“In addition to that, Eskom was due to restart 2.4GW of coal capacity by the end of 2023. Against this background, we expect coal consumption to rebound to 164Mt by 2026.

“In Zimbabwe, a 0.3GW coal-fired power unit started operation in March, and another block of a similar size is expected to come online in late 2023. Coal capacity in Botswana is about to increase as well, as a new 0.6GW coal plant is planned for construction by India’s Jindal Steel and Power, with completion due in 2026,” said the IEA.

But, beyond that, they do not expect any new coal projects to be commissioned in Africa by 2026.

Read the IEA’s Coal Market Report 2023 report online. ESI