After increasing significantly for three consecutive years, global coal production is expected to grow only marginally in 2020, due to the disruptions caused by the outbreak of Covid-19. Disruption to date has been most significant in China. Coal production declined by around 6% in the first two months of 2020 as workers could not return to mine sites, owing to the prolonged Lunar New Year holidays, as well as road blockages and lockdowns imposed to control the outbreak of the virus. This led to only 57% of coal mines being operational as of 14 February. However, by 4 March, 83% of China’s coal mining capacity was operational and coal production in China is expected to recover over the remainder of 2020 and decline by only 1.2% on an annual basis.
Across the globe, coal production is expected to be only marginally affected by Covid-19 compared with other commodities, as thermal coal mines are permitted to operate during lockdowns as they are deemed essential due to the need to maintain power supplies. In India, for example, around 845Mt of coal is expected to be produced in 2020, an 8.3% increase compared with 2019. Production from South Eastern Coalfields Ltd (SECL) and Mahanadi Coalfields Ltd (MCL) will be of key concern during the current year, as it strides towards recovery from the impacts of the severe monsoon and labour strikes in 2019. Elsewhere, thermal coal mines in South Africa have been permitted to operate despite the 21-day lockdown.
Overall global production of coal is expected to increase to 8.17 billion tonnes (Bnt) from 8.13Bnt in 2019, a growth of 0.5%. Within this, thermal coal production is expected to grow by 0.5% to 7.05Bnt, while metallurgical coal production is forecast to be flat at 1.1Bnt.
Over the next four years, production of thermal coal is expected to grow by 2.5% CAGR to reach 7.60Bnt by 2023, due principally to increasing demand from India and China. However, while demand is growing, coal is declining as proportion of power generated. At present 67% and 75% of the electricity in China and India is generated from coal. However, they both have environmental commitments to reduce carbon emissions, for which they have targeted to reduce these shares to 58.5% and 50% by 2030 respectively.
Demand from other parts of the world is already declining as countries shift away from coal-fired power and to renewables and cleaner forms of energy. While globally 38% of electricity was generated from coal in 2019, this is expected to fall to 25% by 2040 as countries pursue targets to reduce greenhouse gas emissions, with the share of electricity generated from renewables expected to increase to 44% in 2040 from 23.4% in 2018.
For metallurgical coal, a decline in construction activity and automotive production in 2020 will significantly impact demand for steel in China, leading to a 1.5% decline in metallurgical coal demand in the country. Already, many producers in China are running at low capacities as inventories rise. However, robust demand from India is expected to offset the decline from China, resulting in a flat growth rate of 0.07% to 1,054.4Mt in the global demand for coking coal. Looking ahead, as activity picks up once the crisis has abated, demand growth will strengthen and consumption of coking coal is forecasted to reach 1,093Mt by 2023, a 1.2% compound annual growth rate.