Coal industry faces a period of weak growth

The coal industry faces a period of weak growth, as global demand will peak in the coming years, according to the latest forecasts of the International Energy Agency (IEA). The agency expects coal consumption to grow on average by 0.6% between 2015 and 2021, as developed countries continue will consume less coal, while the consumption in China has stalled. These factors will overshadow the rising demand from emerging economies such as India, for example, and countries in Southeast Asia.

“The demand for coal headed to Asia, where emerging economies with growing population are looking for affordable and secure energy sources”, said the director of the Energy security unit at IEA, Keisuke Sadamori.

In 2015, the global demand for coal fell for the first time since 1990. Many companies went in bankruptcy because there is more supply than demand.

IEA does not expect a significant change in trends. The agency forecasts that consumption in 2021 will reach 5.63 tons of coal equivalent, which is slightly above the level from 2014. The authors of the report expect that the factors of the weakness of the sector will only intensify.

The increasing consumption of natural gas to generate electricity using renewable energy sources and policies for environmental protection will reduce appetite for coal in Europe, USA and other developed countries. Meanwhile, emerging markets will seek coal for energy production, as trying quickly to increase its production capacity. The economic growth and infrastructure costs, especially in India, will also increase the demand for coal for steel production and iron.

Whether demand for coal will return to the levels of 2014, will depend largely on consumption in China, which is about half of the global coal consumption. The impressive economic growth of China, started in the 90s led to a super cycle in commodities. The subsequent slowdown in economic activity in the country largely outweighs the market for coal and other natural resources. The demand for coal in China is reduced and IEA believes that this will continue until 2018 and will then start upward movement until 2021. However, the coal consumption in 2021 is expected to be lower than 8 years earlier.

Until 2021, India will observe the largest increases in absolute terms in the coal demand. In the Association of Southeast Asian Nations (ASEAN), where members Indonesia and Vietnam will have the highest growth in consumption – an average of 7.2% annually.

Supply growth is also expected to be anemic – only 0.4% per year between 2015 and 2021, as the situation in offering reflects this search.

India and Australia are expected to produce more coal, China’s output will remain unchanged, and in Europe and the US will decrease.

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