GLOBAL COAL DEMAND UP

PLATTS - 17 Dec 2021 - Overall coal demand is set to grow 6% in 2021, threatening net-zero goals, the International Energy Agency said Dec. 17. This could lead global coal production -- of thermal and metallurgical qualities -- to rise to its highest-ever level in 2022, after output failed to keep pace with 2021's demand rebound, IEA said in its Coal 2021 report.

This year's demand surge -- leading to all-time price highs in early October for both metallurgical and thermal -- was seen due to rapid economic recovery following the COVID-19-related markets slump of 2020, when coal demand was estimated to have fallen 4.4% from the previous year.

Demand for coal was particularly strong in the first half of 2021, cutting into stock levels and pushing up prices, the IEA reported. In China and India coal shortages led to power outages, resulting in significant steel and aluminum production cuts in China which brought prices for these commodities to multi-year highs. This in turn led to domestic policies to ramp up production and reduce coal shortages, facilitated by the large presence of state-owned companies in production.

"Overall coal demand worldwide – including uses beyond power generation, such as cement and steel production – is forecast to grow by 6% in 2021," the IEA said, putting this year's demand figure at 7,906 million mt. "That increase will not take it above the record levels it reached in 2013 and 2014. But, depending on weather patterns and economic growth, overall coal demand could reach new all-time highs as soon as 2022 and remain at that level for the following two years, underscoring the need for fast and strong policy action."

Coal power's sharp rebound is taking it to a new record in 2021, threatening net-zero goals, the report argued. After falling in 2019 and 2020, global power generation from coal is expected to jump by 9% in 2021 to an all-time high of 10,350 terawatt-hours.

Demand for thermal coal this year however grew much more than for metallurgical coal, where IEA expects "a slight increase of 0.5% in 2021, raising consumption to 1,106 million mt."

'Worrying' deviation from net-zero goals

"Coal is the single largest source of global carbon emissions, and this year's historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero," IEA Executive Director Fatih Birol said in a statement. "Without strong and immediate actions by governments to tackle coal emissions – in a way that is fair, affordable and secure for those affected – we will have little chance, if any at all, of limiting global warming to 1.5 °C."

In China, where more than half of global coal-fired electricity generation takes place, coal power is expected to grow by 9% in 2021 despite a deceleration at the end of the year. In India, it is forecast to grow by 12%. This would set new all-time highs in both countries, even as they roll out impressive amounts of solar and wind capacity, according to the IEA.

Asia dominates the global coal market, with China and India accounting for two-thirds of overall demand.

"These two economies – dependent on coal and with a combined population of almost 3 billion people – hold the key to future coal demand," said Keisuke Sadamori, the IEA's director of energy markets and security.

"The pledges to reach net-zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action," Sadamori said.

While coal power generation is set to increase by almost 20% this year in the United States and the European Union, that is not enough to take it above 2019 levels.

"Coal use in those two markets is expected to go back into decline next year amid slow electricity demand growth and rapid expansion of renewable power," the IEA report said.

Metallurgical coal

Following meager growth in 2021, metallurgical coal consumption is forecast to increase to 2024, rising at an annual average of 1.7% to 1,164 million mt, as this remains a central element in steel production, according to the report.

Mining sources, including Mike Henry, CEO of BHP, and Ian Maxwell, CEO of North Coal, have said they expect demand for metallurgical coal used in blast furnace steelmaking to continue relatively strong for as long as the next 30 years due to the continuing rise in global steel production and demand.

Steel is a key material for decarbonization as it is used in production of electric vehicles and wind towers and turbines and is more easily recyclable than other metals. Many of the world's major blast furnaces, including in China and India, still have 20-30 years' useful life left, and there is currently insufficient ferrous scrap to rapidly boost steel production by the less carbon-intensive electric arc furnace production route, the CEOs said in recent presentations.

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