Global coal demand is set to remain broadly unchanged in both 2024 and 2025 as surging electricity demand in some major economies offsets the impacts of a gradual recovery in hydropower and the rapid expansion of solar and wind, according to the IEA’s latest update on coal market trends worldwide.

The world’s use of coal rose by 2.6% in 2023 to reach an all-time high, driven by strong growth in China and India, the two largest coal consumers globally, the IEA’s Coal Mid-Year Update finds. While coal demand grew in both the electricity and industrial sectors, the main driver was the use of coal to fill the gap created by low hydropower output and rapidly rising electricity demand.

In China, which accounts for more than half of global coal consumption, electricity generation from hydropower has been recovering in 2024 from last year’s exceptionally low levels. This, alongside the continued rapid deployment of solar and wind, is significantly slowing down the growth in coal use in 2024. But another major annual increase in China’s electricity demand, forecast at 6.5% in 2024, makes a decline in the country’s coal consumption unlikely. In India, coal demand growth is set to decelerate in the second half of 2024 as weather conditions return to seasonal averages. In the first half of the year, India’s coal consumption rose sharply as a result of low hydropower output and a massive increase in electricity demand due to extreme heatwaves and strong economic growth.

Coal demand in Europe is continuing on the downward trend that began in the late 2000s, largely due to emissions reduction efforts in power generation. After having fallen by more than 25% in 2023, coal power generation in the European Union is forecast to drop by almost as much again this year. Coal use has also been contracting significantly in the United States in recent years, but stronger electricity demand and less switching from coal to natural gas threaten to slow this trend in 2024. Japan and Korea continue to reduce their reliance on coal, although at a slower pace than Europe.

“Our analysis shows that global coal demand is likely to remain broadly flat through 2025, based on today’s policy settings and market trends,” said Keisuke Sadamori, IEA Director of Energy Markets and Security. “The continued rapid deployment of solar and wind, combined with the recovery of hydropower in China, is putting significant pressure on coal use. But the electricity sector is the main driver of global coal demand, and electricity consumption is growing very strongly in several major economies. Without such rapid growth in electricity demand, we would be seeing a decline in global coal use this year. And the structural trends at work mean that global coal demand is set to reach a turning point and start declining soon.”

On the supply side, global coal production is expected to decrease slightly in 2024 after steady growth the year before. In 2024, coal production in China is moderating after two years of staggering growth. In India, the push to boost coal production continues, with a supply increase of around 10% expected in 2024. In advanced economies, coal production is in decline, broadly reflecting demand.

The report finds that trade volumes are at the highest levels ever seen despite the collapse of imports in Europe and the decline in imports in Northeast Asia (Japan, Korea and Chinese Taipei) since 2017. However, other countries are stepping in to take up available supply. In 2024, Vietnam is set to become the fifth largest coal importer, surpassing Chinese Taipei. Imports to China and India remain at all-time highs.

Despite declining domestic production in China in the first half of this year, tighter sanctions on Russian producers and disruptions in a few exporting countries, the global coal market is well supplied, according to the report. With more stable natural gas prices than in recent years, coal prices remained range-bound in the first half of 2024. They have returned to levels last seen before the global energy crisis but remain elevated due to inflationary pressures.