A recent International Energy Agency (IEA) market update has revealed that the agency expects global demand for coal to remain high for the rest of the year. Although Europe and the United States have taken steps to cut down coal use, increased use in Asia offset the decline in coal use in the West, indicating the need for more robust policies and investments in clean energy.
Coal demand in the U.S. and the European Union fell by 24% and 16% respectively over the first six months of the year while demand in China and India, the largest coal consumers in the world, increased by more than 5%. China is the largest coal consumer in the world and accounts for one-third of global greenhouse gas emissions, making its participation in green energy initiatives key.
However, the Eastern Asian country has significantly increased its investment in coal in recent months to shore up its energy supplies. Unseasonably hot weather and droughts have also reduced China’s geothermal energy capacity and forced it to turn to its coal-fired plants. In the last several months, China has invested significantly more money than any other country and built six times more new coal power plants than the rest of the globe combined.
The IEA’s Coal Market Update estimates that coal consumption rose by 3.3% to 8.3 billion tons in 2022. Additionally, the report expects any reduction in coal-generated power in 2023 and 2024 to be offset by increases in industrial coal use.
Unsurprisingly, China, India and Southeast Asian nations are expected to consume three out of every four tons of coal used globally this year. The European Union, on the other hand, saw its general coal use decrease in 2022 as a temporary increase in the use of coal-generated electricity was offset by reduced industrial use. Coal use within the EU is expected to reduce even further as renewables like hydropower and nuclear recover from recent slumps and increase their output. The U.S. has also seen a reduction in coal-fired generation thanks to decreasing natural gas prices.
Generally, the global energy industry was shaken by the coronavirus pandemic and the Russia-Ukraine war, which has significantly exacerbated the energy crisis, especially in Europe. However, after an extremely turbulent three years, global coal markets are stabilizing and becoming more predictable.
Demand for the dirty fuel is estimated to have expanded by 1.5% in the first half of the year to around 4.7 billion tons based on a 2% increase in nonindustrial use and a 1% jump in power generation.
These figures show that coal companies such as Arch Resources Inc. (NYSE: ARCH) are likely to remain relevant until the demand for coal dwindles to levels that can’t sustain the entities selling this commodity.
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