After an unexpected jolt in 2020, coal demand is set to bounce back in two of the world’s largest coal consumers, India and China, say global analysts at Moody’s.
The outlook for the global coal industry is stable because of an improvement in demand over the next 12-18 months, which will help prices.
But the news outside Asia remains grim for King coal, as the COVID-19 pandemic will likely also limit any rebound in coal-fired power generation and accelerate the decline of coal in the US and Europe by a few years, says Moody’s.
Power generation from renewables have made up most recent capacity additions in such major markets as the US, Europe, China and India, and continue to displace thermal coal generation, especially with lower power demand. India and China together account for 60% of the world’s coal consumption. A number or share that could continue to creep up all the way to 2030, based on each country’s own projections.
“An improving supply/demand balance will also modestly lift coal pricing in most regions in 2021. We expect EBITDA (of coal producers) will increase more than 10% in 2021, but remain below 2019 levels,” says Moody’s.
“We expect a modest Asia-Pacific recovery in 2021. Earnings will remain well below 2019 levels amid bigger risks for coal producers than for other mining companies.”
Demand for coal depends heavily on electric power generation and steel production. Both the industries performance are expected to significantly improve from next year from current levels.
The global coal market remains oversupplied, but an improving supply/demand balance will modestly lift coal pricing in most regions in 2021.
Australia will maintain coal production levels in 2021. Indonesian producers’ earnings will remain weak, while Chinese producers will benefit from government measures supporting the domestic coal industry.
The North American coal market will post a more modest rebound in 2021.
Coal shipments are facing hurdles due to a drive for clean energy especially in developed markets. The seaborne market accounts for just 20% of global coal production, but heavily influences the financial health of coal producers. In India , for instance, while imports are becoming undesirable, it is because the country wants to replace those with domestic supplies. One reason coal mining has been opened up further in recent weeks.
Coal exports represent about 1 billion tons of the 5 billion-plus ton global market. Asia-Pacific countries such as China, India, Japan and Korea are the biggest importers of coal. Imports of the dirty fuel are declining in the European Union, though still significant.
Australia, Indonesia, and Russia export most of the world’s coal, along with such smaller exporters as Colombia, South Africa, the US and Canada.
Meanwhile , global economies face a bumpy path to economic recovery and from the pandemic. “Resurgence of COVID-19 cases in key Asian import markets of Japan, Korea and Taiwan could undercut the modest demand recovery that we expect in 2021,” says Moody’s
–Biman Mukherji