India and China accounted for almost half of the total global coal imports till April, with demand for the key commodity growing in both nations by 5.5 per cent in H1 2023, said International Energy Agency (IEA) on Thursday.
For the entire calendar year, the demand for coal in the world’s top two coal consumers is expected to slow down, compared to the January-June 2023 period. IEA expects India to clock an annual demand of 5 per cent in 2023, while China’s demand for the dry fuel is likely to grow at 3.5 per cent y-o-y.
Stronger coal supply and lower gas prices sent coal prices steeply downward towards the end of 2022, the agency pointed out, adding that the scenario attracted price-sensitive buyers from China and India.
Although the price declines were partially offset by the depreciation of the Chinese yuan renminbi and rupee against the US dollar. China and India ramped up imports at the beginning of 2023, with China even ending its unofficial ban on coal from Australia.
“Until April, imports from China and India amounted to approximately 50 per cent of global coal imports, as the two largest coal producers and consumers are also the largest importers,” said IEA in its latest coal market report.
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Expanding economies
In China, coal demand grew by 4.6 per cent in 2022 to a new all-time high of 4 519 million tonnes (MT). Similarly, India’s economy performed very well in 2022 with a growth of 6.9 per cent. This resulted in coal demand increasing by more than 8 per cent to a total 1,155 MT, becoming the only country besides China to cross the 1.1-billion-tonne mark.
“Due to strong economic growth and coal reliance, India’s coal demand grew by about 5.5 per cent in the first half of 2023. With growth in the power sector slowing down a bit in the second half, we expect a total increase of 5 per cent for the year totalling 1,212 MT,” IEA projected.
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In the first half of 2023, India’s supply rose by about 10 per cent, reaching a new single-month production record of 107 MT in March, surpassing the 100 MT in a single month for the first time.
“For the entire year, we expect an increase in coal production to about 989 MT (+7 per cent), close to the government’s 1 billion tonnes target,” the agency noted.
Global coal demand
IEA estimates that coal demand grew by about 1.5 per cent in the first half of 2023 to a total of about 4,665 MT, backed by both an increase of 1 per cent in power generation and 2 per cent in non-power. It observed continued increases in China, India and Indonesia, which more than offset declines in the US, the EU and Japan.
However, it expects a decrease in global coal-fired power generation in H2 2023 to more than reverse the first-half gains.
“For the whole year, we expect demand from the power sector to be 0.4 per cent lower at about 5,597 MT. In the non-power sector, we expect growth to continue, reaching 2,791 MT for the full year 2023,” it said.
As a result, overall global coal demand is expected to remain flat at around 8,388 MT (+0.4 per cent) in 2023. Whether coal demand in 2023 grows or declines, will depend on weather conditions and on the economies of large coal consuming nations, IEA added.
India and China in 2024
China will continue to account for more than half of the world’s coal use, with the power sector alone consuming one-third.
“If we add India, the global share rises to about 70 per cent, meaning that China and India together consume double the amount of coal as the rest of the world combined,” IEA added.
Along with recent growth in Southeast Asia, the dominance of the Asia continent is further increasing. In 2024, the share of China, India and the ASEAN region is expected to reach 76 per cent, it has projected.