The International Energy Agency (IEA) predicts that coal demand will remain at an all-time high this year, following a record-high global coal demand of over 8.3 billion tonnes in 2022. The IEA's "Coal Market Update" report for July 2023 reveals that coal demand grew approximately 1.5% in the first half of the year, totalling about 4.67 billion tonnes, driven by a 1% increase in power generation and a 2% increase in non-power use.

The increase in coal demand was observed mainly in China, India, and Indonesia, which offset declines in the United States, the European Union (EU), and Japan. The IEA expects global coal-fired power generation to decrease in the second half of the year. Consequently, demand from the power sector is anticipated to be 0.4% lower for the whole year, at about 5.6 billion tonnes. However, the non-power sector is expected to continue growing, reaching 2.79 billion tonnes for the full year.

Considering this growth, the overall global coal demand is projected to remain flat at approximately 8.39 billion tonnes (+0.4%) for this year. The actual growth or decline in coal demand for the year will depend on weather conditions and the economic situations of major coal-consuming nations.

The report highlights that market patterns have returned to a more recognizable state this year after the disruptions caused by the COVID-19 pandemic in 2020, the strong post-pandemic recovery in 2021, and the global energy crisis triggered by Russia's invasion of Ukraine in 2022. The patterns include declining coal demand in the US and the EU, while Asia continues to experience growth.

The decline in coal demand in the US and the EU is attributed to the power sector, influenced by weak electricity demand and the expansion of renewable energy. Cheap gas prices are also contributing to reduced coal demand in the US. In contrast, China's coal demand increased by about 5.5% in the first half of the year due to economic recovery and reliance on coal-fired power generation during periods of low hydro output. However, growth in China is expected to slow in the second half of the year due to improved hydropower availability.

India's coal demand also grew by about 5.5% in the first half of the year, driven by economic growth and coal reliance. The power sector's growth is expected to slow down slightly in the second half. Consequently, the IEA forecasts a total increase of 5% in India's coal demand for the year, reaching 1.21 billion tonnes.

Indonesia is expected to remain the fifth-largest coal consumer this year, as positive economic prospects in various sectors, including power and smelting, will drive increased coal demand.

On the supply side, global coal production is expected to continue growing this year, with strong ramp-ups of production in China, India, and Indonesia offsetting declines in the US and the EU. China's production is expected to increase by 3.3% to 4.63 billion tonnes for the full year, while India's production may reach about 989 million tonnes, a 7% increase compared to the previous year.

South Africa's coal production is likely to decline by about 4.2% to 220 million tonnes due to demand destruction resulting from infrastructure issues and poor maintenance of coal power plants. The US is also experiencing a decline in coal production, with an estimated drop of 4.2% to 519 million tonnes, while EU production is projected to fall by about 8% to 321 million tonnes.

Australia's coal production is set to increase by 2% due to improved weather conditions, enabling producers to expand production after being affected by La Niña weather conditions in the previous year. The IEA expects coal production in Australia to reach 460 million tonnes.

Despite no new large-scale projects coming online, high coal prices in the previous year have left coal miners with stronger financial positions, enabling them to invest in sustaining and expanding capital expenditures. The end of La Niña weather conditions has also improved the coal supply outlook for this year.

Despite the fluctuations in demand and supply, global coal trade is expected to remain significant, with increased exports from Indonesia and Mongolia primarily covering the elevated demand for thermal and metallurgical coal, respectively. The total seaborne coal trade is projected to approach the record volumes seen in 2019, reaching around 1.34 billion tonnes (about 93% of total coal trade).