India’s coal demand grew at highest pace globally in 2022

India’s coal demand is expected to grow at 7 per cent on an annual basis in 2022—the highest by any country—fuelled by rising coal-based power generation to meet higher-than-usual summer temperatures and expanding economic activity.

Coal consumption by the world’s second largest consumer soared 14 per cent year-on-year (Y-o-Y) in 2021 to 1,033 million tonnes (MT), the International Energy Agency (IEA) said in its latest report.

“The largest increase in coal demand this year is expected in India (7 per cent or 70 MT), followed by the European Union (6 per cent or 29 MT) and China (0.4 per cent or 18 MT), mainly led higher by stronger power sector use,” the report projected.

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The IEA report pointed out that India’s consumption doubled since 2007 at an annual growth rate of 6 per cent, and is set to continue to be the growth engine for global coal demand.

“In India, the government has tried to increase production for a long time to reduce imports. In 2021, coal production reached 800 MT for the first time. In our forecast, India’s production surpasses 1 billion tonnes by 2025,” it added.

Power sector

“For 2022, we expect a 7 per cent increase in coal demand. Despite the slowdown in global growth, the Indian economy is doing exceptionally well, with GDP forecast to expand by 7.3 per cent this year,” IEA noted.

The demand is largely being led higher by a sharp increase in electricity consumption, of which around 73 per cent will be generated by coal-fired power plants in 2022.

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“We expect electricity demand to grow by 7 per cent due to robust economic growth. Demand was also supported by the severe heatwave from March to early May. In April, the daily power deficit amounted to around 5 per cent of overall supply on a national level and up to 15 per cent in a few states. With such tight electricity markets, we expect coal consumption in the power sector to increase by 7 per cent in 2022,” it said.

Non-power sector

Coal-intensive industries, such as cement and steel, continued to grow in 2022. From January to September, monthly cement production averaged 11 per cent higher Y-o-Y. The growth rate peaked in May before slowing in July when the onset of the monsoon season curbed construction activity. Monthly sponge iron and hot metal production increased by an average of about 1 per cent and 6 per cent, respectively.

“Overall, we expect 2022 thermal coal consumption outside the power sector to rise by 7 per cent and met coal by 2 per cent,” the report projected.

Global demand

Global demand growth for coal is expected to slow markedly in 2022, rising by just 1.2 per cent, but still reaching a new record of 8,025 MT, slightly above the 2013 level (7,997 MT).

First, tight natural gas supplies and the resulting high gas prices are driving some countries and companies to turn to relatively cheaper coal. Second, heat waves and droughts in some regions of the world drove up electricity demand and reduced hydropower generation, creating a gap that had to be filled by mostly dispatchable thermal power plants.

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