IEA Report Projects Increase in Global Demand for Coal

A recently published IEA report has projected that the global consumption of coal this year will increase to high levels last recorded almost 10 years ago. Based on current market and economic trends, the consumption of coal around the globe is expected to increase by 0.7% this year, reaching eight billion tons. This is assuming China’s economy will recover in this year’s second half.

This new international total will match the figures recorded in 2013, with the new report also highlighting the turmoil observed in coal markets these last few months. This turmoil has significant implications for nations where coal is still used to generate electricity as well as in various industrial processes. This report comes as the climate concerns increase with global temperatures rising, as coal is the biggest single source of energy-related carbon dioxide emissions.

Last year, the global consumption of coal bounced back by roughly 6% as the international economy recovered from the shock of the coronavirus pandemic. This rapid increase contributed to the biggest ever yearly increase in global energy-related carbon dioxide emissions.

The demand for coal globally is being supported by increasing prices for natural gas, which have prompted many countries to switch to coal from gas. These factors are partially being neutralized by both the inability of some major producers of coal to increase their production and China’s slowing economic growth.

Since the start of this year, coal demand in India has strengthened, with projections expecting it to increase by 7% this year as the use of electricity increases and the nation’s economy grows. In China, the demand for coal is said to have dropped by 3% during the first half of this year but is expected to rise as the year progresses. Combined, India and China consume double the coal amount that the rest of the world consumes, with China alone making up more than one-half of the global demand.

The European Union’s consumption of coal is also expected to increase by 7% this year, on top of its 14% hike in 2021. This increase will be driven by demand from the electricity sector because coal is used to replace gas. Gas, which has experienced significant spikes in price following Ukraine’s invasion by Russia, is currently in short supply in the European Union.

As the supply of gas wavers, some nations in the EU have been reopening closed coal plants and extending the life of coal plants that were meant to be closed. Despite this, Europe only makes up 5% of coal consumed globally.

The surging demand for coal is giving entities such as Peabody Energy Corporation (NYSE: BTU) a welcome boost to their bottom lines.

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