The International Energy Agency (IEA) released their 2018 Coal Market Report last month with forecasts through 2023. Coal accounts for 27 percent of total global energy and 38 percent of global electricity generation—the same market share it held in 1998. In 2017, global coal demand increased by 1 percent and electricity generation from coal increased by around 3 percent. IEA’s coal market report includes IEA’s five-year forecasts for global coal supply, demand, and trade, forecasting that global coal demand will remain fairly stable through 2023 as developing economies increase their coal demand, negating decreases by industrialized countries. IEA expects global coal demand to gradually decline from 27 percent to 25 percent, mainly due to growth in renewables and natural gas.
Most Western European countries are lowering their coal demand. By 2023, France and Sweden are expected to have closed their last coal-fired power plants. Germany, which generated 37 percent of its electricity from coal in 2017, will then be the only significant coal consumer in Western Europe as it replaces its nuclear reactors with wind and solar energy backed up mainly with coal power.
In Eastern Europe, coal demand remains stable as most Eastern European countries have not announced phase-out policies. Some new coal-fired power plants are under construction in the Balkans, Greece, and Poland, but IEA believes that they will replace older and less efficient coal capacity keeping coal use at existing levels. Poland generated 79 percent of electricity from coal in 2017.
India’s economy is expected to grow by more than 8 percent per year to 2023 and its electricity demand is expected to increase by over 5 percent per year. In 2017, coal supplied 56 percent of India’s primary energy demand and 76 percent of its electricity. IEA expects India’s coal demand growth to increase by less than 4 percent per year through 2023 compared to 6 percent over the last decade due to the country’s renewable expansion and the use of supercritical technology in new coal power plants that are more efficient than older plants. India’s economic growth and infrastructure development is also expected to increase coal consumption in steel and cement production.
South and Southeast Asia’s coal demand is expected to increase by more than 5 percent per year through 2023—the highest growth rate worldwide. Indonesia, Pakistan, Bangladesh, Philippines and Vietnam together account for over 800-million people, with an average annual per capita electricity consumption of just over 800 kilowatt hours. While that is significantly less than in the European Union, it is a growing market. New coal plants under construction will be the main driver of coal demand growth in the above named countries. Other countries with higher per capita electricity use, like Malaysia and the United Arab Emirates, have energy mix diversification policies that support new coal plants.
China’s coal use represented 60 percent of its primary energy demand in 2017 and 67 percent of its electricity demand. IEA expects increased electrification of transportation and heating in China, and increased electricity consumption by its growing middle class. However, despite these areas of increased electrification, IEA assumes that the Chinese economy is in a structural transformation and that its electricity intensity will decline over time, stopping further growth in coal power generation by 2020 with overall coal demand slowly declining at less than 1 percent per year on average.
In 2017, Chinese coal imports grew by 15 million metric tons, and other large importers either had record imports (Brazil, Chinese Taipei, Korea, Malaysia, Mexico, Morocco, Philippines, Pakistan, Turkey, and Vietnam) or near record imports (Chile, Japan, Thailand). Further growth is expected in 2018 in China and India making seaborne thermal coal trade reach close to 1 billion metric tons.
Thus, the future of coal imports is in South and Southeast Asian demand. Growth is expected in India, Korea, Vietnam, Malaysia, the Philippines, Pakistan, and other Asian countries. But overall, the market depends on China, whose changing policies can swing imports from one year to the next year. Policies such as import quotas, port caps, taxes, and quality tests are important to coal trade.
Australia is the expected leader in coal export markets, followed by Indonesia. IEA, however, expects Indonesian coal exports to decline due to increasing domestic demand and lower prices, leaving Australia as the largest coal exporter in the world. IEA also expects increasing exports from the Russian Federation, which is ramping up export infrastructure and targeting the Asian markets. The IEA expects the United States to remain a swing supplier of coal exports.
IEA expects coal to remain a dominant global fuel through at least the next 5 years as developing countries continue to build coal-fired plants to improve their economies and provide electricity to their people. Coal demand growth is expected to be the highest in South and Southeast Asia with many of those countries large coal importers. Australia is expected to be the largest coal exporter while the United States remains a swing supplier.