A recent coal market trend update from the International Energy Agency (IEA) notes that global demand for coal will most likely remain stable through 2025. Coal use in energy generation has been on the decline over the last decade as dozens of countries worldwide work to eliminate the dirty fossil fuel from their energy mixes. Electrification coupled with a significant surge in renewable energy capacity has helped to reduce coal use and reduce greenhouse-gas emissions as much as possible.
The result has been a notable decline in the demand for coal as major markets, including the European Union, China and the United States, substitute it with cleaner alternatives such as solar and wind. Even so, the IEA’s updates state that demand for coal will remain relatively flat in 2024 and 2025. According to the Coal Mid-Year Update, global coal use increased by 2.6% last year, an all-time high that was largely caused by robust growth in India and China, currently the two largest consumers of coal on the globe.
The report explains that although the world’s renewable energy capacity is rising at record rates, the main driver behind the surge in coal use in 2023 was due to increased demand for power and an energy gap caused by reduced hydropower output. China was especially affected by low hydropower output due to droughts in key power production regions and turned to coal to fill the energy gap.
With the east Asian nation currently accounting for more than 50% of the world’s coal consumption, any increase in coal use will undoubtedly affect global coal use numbers. As China’s hydropower segment struggled to recover from the lows of 2023, the rapid deployment of solar and wind infrastructure helped China reduce its reliance on coal. However, significant increases in electricity consumption eliminated most of these gains as China turned to coal for surplus energy.
India, another top consumer of coal, is poised to see reduced coal demand in the latter half of 2024 as favorable weather conditions will likely boost energy generation from hydropower plants. The first half of the year was characterized by extreme heat waves, low output from hydropower and robust economic growth that pushed India’s coal use to global highs.
Europe, on the other hand, is currently experiencing a drop in coal demand that started in the late 2000s, thanks to the incorporation of greenhouse-gas emission reduction efforts in the energy-generation space. Coal demand on the continent dropped by more than 25% last year and is predicted to fall by a similar amount in 2024 as the region remains at the forefront of the global race to transition to clean energy. The U.S. has also seen a significant fall in coal use over the past several years, but this trend could wane due to higher electricity demand coupled with a slowed transition from coal to natural gas.
The data indicating that coal use is still high in different parts of the world suggests that entities that focus on extracting this fossil fuel, such as Arch Resources Inc. (NYSE: ARCH), still have a large, commercially viable market to serve despite the growing momentum to phase out this “dirty” fuel.
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