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Coal demand growth to slow as China stutters

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World Coal,

The International Energy Agency has slashed its forecast for global coal demand in its annual coal market report, reflecting demand weakness in China.

“The coal industry is facing huge pressures and the main reason is China,” said IEA Executive Director, Fatih Birol, as he launched the report as an event in Singapoer. “But it is not the only reason. The economic transformation in China and environmental policies worldwide – including the recent climate agreement in Paris – will likely to continue to constrain global coal demand.”

According to the IEA’s Medium-Term Coal Market Report 2015, coal demand growth will be 500 million tonnes of coal equivelent (tce) lower that previously expected. The revision comes as the 2014 fall in Chinese coal demand looks set to accelerate in 2015 – the first time that coal consumption has declined for two years running in the giant Asian country since 1982.

“Coal demand in China is sputtering as the Chinese economy shifts to one based more on services and less on energy-intensive industries,” the IEA said. “New Chinese hydro, nuclear, wind and solar are also significantly curtailing coal power generation, driven not only by energy security and climate concerns but also by efforts to reduce local pollution.”

Under the IEA’s base case scenario, global coal demand totals 5814 million tce in 2020 after average annual growth of 0.8%. Half of that growth will come from India with another quarter from ASEAN countries.

Beyond the base case, the IEA noted that, for the first time since it began publication of the its coal market reports in 2011, a Chinese peak coal scenario may be possible. Under this scenario, Chinese coal demand falls by 9.8% from its 2013 level and more than 300 tce below the base case forecast of nearly 2950 million tce. Meanwhile, global coal demand falls to around 5500 million tce and records negative average growth rates of 0.1% per year to 2020.

In advanced countries, the IEA expects coal to slip into long-term decline. In the US, coal’s share of the generation mix is forecast to fall below 35% by 2020 – the lowest level since the IEA was created over 40 yr ago. On the other side of the Atlantic, in the EU coal power generation falls 1.5% per year to 2020 as power demand stagnates and renewable generation continues to grow.

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