Report: Global Coal Demand Drops Second Year in a Row

Global coal demand fell nearly 2% in 2016, according to the International Energy Agency's (IEA) Coal 2017 Analysis and Forecasts report, released December 18. "Demand for coal has now dropped by 4.2% since 2014, almost matching the fall of 1990-1992, which was the largest two-year decline recorded since the IEA started compiling statistics more than 40 years ago," the report says.

Coal demand varies in different areas, of course. However, while demand in places like India increased, it was not enough to offset significant declines in the United States and China.

Increase in India, Decline in China

The report, which makes forecasts to 2022, predicts that coal use in India will continue to rise. It is expected that coal-fired generation will increase at nearly 4% per year throughout the forecast period, regardless of rapid growth in renewables. Growth of thermal coal demand will increase in the industrial sector due in part to rising steel consumption in housing, railways, shipbuilding, and vehicle manufacturing.

Coal demand in China decreased for the third year in a row, due in large part to a major policy push to improve air quality. Interestingly, coal-fired power generation increased in 2016. "The main driver for this apparent contradiction was coal substitution in small industrial and residential boilers; higher efficiency in power, steel and cement industries also helped. This sets the scene for the years to come," the report explains.

The IEA expects that more than 100 metric tons (Mt) of coal used in the residential and industrial sectors will be replaced by natural gas, with the exception of steel and cement production. "Combined with saturation of heavy industry growth, coal demand is forecast to decline through 2022, despite growth in coal conversion and in coal-power generation. Still, coal supplies over 55% of China's energy demand in 2022," according to the IEA.

The U.S. Question

The Donald Trump administration has made the future of coal in the U.S. a great unknown. While the previous administration was committed to an energy transition, working to regulate coal plants and invest in renewables, the Trump administration has vowed to bring back coal. It remains to be seen if the coal-positive policies of the Trump administration can change the course of an energy market currently favoring low-cost natural gas.

"The country's first new coal mine since 2011 was opened in May and other projects were announced. However, sluggish power demand, abundant gas supply and renewables growth are expected to continue to generate headwinds for coal use and limit the prospects for any resurgence in construction of new coal power plants," the report says of the outlook for coal in the U.S. The IEA forecasts that coal production in the U.S. will be around 510 Mtce in 2022, about the same as current levels, while demand will decline 1% per year on average.

-Abby L. Harvey is a POWER reporter.

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