Projected growth in overall coal use is set to hit record highs over the next two years, due to rapid economic recovery, according to the International Energy Agency.

With electricity demand outpacing low-carbon supply, and with steeply rising natural gas prices, global coal power generation is on course to increase by 9% in 2021 to 10,350 terawatt-hours, a new all-time high,” the Paris-based agency said in its annual market report. However, coal’s share of the global power mix is expected to be at 36%, it said. That is five percentage points below its 2007 peak.

In the US and the European Union, coal power generation is forecast to increase by almost 20% this year but will not reach 2019 levels. By contrast, estimated growth of 12% in India and 9% in China will push coal power generation to record levels. While the increased coal use will derail net zero targets, it will likely provide a boon to the dry bulk market, which has already benefited from a distortion in coal trades this year, partly due to China’s unofficial ban on Australian product as political tensions rose.

Spot dry bulk rates across all segments rose to multi-year highs in 2021, mostly due to a surge in minor bulk trades, but also due to the reshaping of coal trades, with longer sailing distances keeping bulkers tied up for longer. In January to November, global coal exports reached 1.08 BMT, a 5% increase over the same period in 2020, according to Banchero Costa. Australia shipped 31% of the volume, followed by Indonesia at 28%, Russia at 15% and the US with 7%, it said. The biggest increase came from Russia, which grew by 8%, followed by Indonesia at 5% and Australia with 1.7%.

In 2020, global coal demand fell by 4.4%, the largest decline in decades, but much smaller than the annual drop that was initially expected at the height of the lockdowns early in the pandemic, with large regional disparities, the IEA said. Coal demand grew by 1% in 2020 in China, where the economy began recovering much earlier than elsewhere, whereas it dropped by almost 20% in the US and the EU, and by 8% in India and South Africa. Beyond power generation, coal demand for cement and steel production is forecast to grow by 6% this year, below records seen in 2013 and 2014, according to the IEA. “But depending on weather patterns and economic growth, overall coal demand could reach new all-time highs as soon as 2022 and remain at that level for the following two years,” it said. “The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal — but these are not yet visible in our near-term forecast,” said the IEA’s director of energy markets and security Keisuke Sadamori. “Asia dominates the global coal market, with China and India accounting for two thirds of overall demand. These two economies — dependent on coal and with a combined population of almost 3bn people — hold the key to future coal demand.”