Coal consumption in 2022 rose by 3.3% to 8.3bn tonnes, setting a new record, according to the IEA’s mid-year coal market update. In 2023 and 2024, small declines in coal-fired power generation are likely to be offset by rises in industrial use of coal, the report predicts, although there are wide variations between geographic regions.

China, India and south-east Asian countries together are expected to account for three out of every four tonnes of coal consumed worldwide in 2023. In the European Union (EU), growth in coal demand was minimal in 2022 as a temporary spike in coal-fired power generation was almost offset by lower use in industry. European coal use is expected to fall sharply this year as renewables expand, and as nuclear and hydropower partially recover from their recent slumps. In the US, the move away from coal is also being accentuated by lower natural gas prices.

After three turbulent years marked by the COVID-19 shock in 2020, the strong post-pandemic rebound in 2021 and the turmoil caused by Russia’s invasion of Ukraine in 2022, coal markets have returned to more predictable and stable patterns in 2023, says the IEA. Global coal demand is estimated to have grown by about 1.5% in 1H2023, to a total of about 4.7bn tonnes, lifted by an increase of 1% in power generation and 2% in non-power industrial uses.

By region, coal demand fell faster than previously expected in the first half of this year in the US and the EU – by 24% and 16%, respectively. However, demand from the two largest consumers, China and India, grew by over 5% during the first half, more than offsetting declines elsewhere.

‘Coal is the largest single source of carbon emissions from the energy sector, and in Europe and the US, the growth of clean energy has put coal use into structural decline,’ notes IEA Director of Energy Markets and Security Keisuke Sadamori. ‘But demand remains stubbornly high in Asia, even as many of those economies have significantly ramped up renewable energy sources. We need greater policy efforts and investments – backed by stronger international cooperation – to drive a massive surge in clean energy and energy efficiency to reduce coal demand in economies where energy needs are growing fast.’

The shift of coal demand to Asia continues. In 2021, China and India already accounted for two-thirds of global consumption, meaning together they used twice as much coal as the rest of the world combined. In 2023, their share will be close to 70%. By contrast, the US and EU – which together accounted for 40% three decades ago and over 35% at the beginning of this century – represent less than 10% today.

The same split is observed on the production side. The three largest coal producers – China, India and Indonesia – all produced record amounts in 2022. In March 2023, both China and India set new monthly records, with China surpassing 400mn tonnes for the second time ever and India surpassing 100mn tonnes for the first time. Also in March, Indonesia exported almost 50mn tonnes, a volume never shipped by any country before. By contrast, the US, once the world’s largest coal producer, has more than halved production since its peak in 2008.

After the extreme volatility and high prices of last year, coal prices fell in 1H2023 to the same levels as those seen in summer 2021, driven by ample supply and lower natural gas prices. Thermal coal returned to being priced below coking coal, and the big premium for Australian coal narrowed following the easing of disruptive La Niña weather that had hampered production. Russian coal has found new outlets after being barred in Europe, but often at considerable discounts, notes the IEA.

Cheaper coal has made imports more attractive for some price-sensitive buyers. Chinese imports have almost doubled in the first half of this year, and global coal trade in 2023 is set to grow by more than 7%, outpacing overall demand growth, to approach the record levels seen in 2019. Seaborne coal trade in 2023 may well surpass the record of 1.3bn tonnes set in 2019, suggests the report.