Global coal demand declined 4% in 2020, the biggest drop since World War II. The main driver of the decline was lower electricity demand owing to Covid‑19 restrictions and the resulting economic downturn. Preferential dispatch or use of renewables in many markets squeezed gas and coal in the electricity mix. Lower gas prices saw significant fuel switching away from coal, particularly in the United States and the European Union, where coal use for power fell 20% and 21%, respectively. Overall, declines in the power sector accounted for over 40% of lower global demand in 2020. The Covid‑19 pandemic also affected industrial output, notably steel and cement, further lowering coal demand. 

In 2021, we expect recovering economic activity to reverse 2020’s decline in coal demand, with a 4.5% increase pushing global coal demand above 2019 levels. The power sector accounted for just over 40% of the drop in coal use in 2020, but the rapid increase in coal-fired generation in Asia sees it account for three-quarters of the rebound in 2021. Gas prices are also expected to rise in 2021, leading to some switching back to coal, notably in the United States and the European Union. The growth of coal consumption in 2021 is a continuation of the rebound in global coal demand that began in the final quarter of 2020. While an exceptional cold snap in December in northeast Asia was partly to blame for increasing coal demand, the rapid growth of coal-fired electricity generation is a reminder of coal’s central role in fuelling some of the world’s largest economies.

China is the only major economy where coal demand increased in 2020Strong economic growth underpins electricity demand in 2021, while post-Covid stimulus measures support production of steel, cement and other coal-intensive industrial products. We expect coal demand to increase by more than 4% in 2021, keeping demand well above the 2014 peak and reaching the highest ever levels for China.

The Chinese coal power fleet (including combined heat and power, or CHP, plants) represent around one-third of global coal consumption. The future of both Chinese and global coal demand depends on the Chinese electricity system. Electricity demand growth remains closely linked to economic growth in China, with demand increasing on a one-to-one ratio with GDP. What additional share of electricity demand is met by coal depends on how fast technologies such as renewables and nuclear come on line. Last year, despite the Covid‑19 outbreak, renewable capacity additions increased to over 100 GW, largely owing to rushes to complete projects before a subsidy phase-out deadline. Because of accelerating increases in renewables deployment, coal is expected to meet only 45% of the projected 8% increase in electricity demand in 2021.

In India, April 2020 marked the lowest point of coal consumption in many years as a significant economic slowdown in the second half of 2019 was followed by Covid lockdowns. The economic recovery since led to a continuous rebound of coal consumption, with a 6% increase in the fourth quarter of 2020. Higher coal demand was also driven by a decline in generation from hydro, following 2019’s exceptionally high output. Our estimate for India coal consumption assumes a strong economic rebound in 2021, pushing Indian GDP firmly above 2019 levels and driving up coal demand by almost 9% to 1.4% above 2019 levels.

In the United States, coal remains on a structural decline even though 2021 is projected to be the first growth year for consumption since 2013. Recovering electricity consumption and higher gas prices underpinned increased coal use in December 2020, the first monthly year-on-year increase since November 2018. Coal demand from the power sector is expected to rebound by 10% from the lows of 2020, though that still should not push coal demand above 2019 levels. Coal-fired electricity generation represents 90% of coal consumption in the United States and has more than halved since 2010, with demand falling by one-third between 2018 and 2020. 

In the European Union, coal-fired electricity generation is disappearing or becoming negligible in an increasing number of countries. Austria and Sweden closed their last coal power plants in 2020; others like Portugal will do so this year, and carbon allowances continue to deter coal generators. Germany, Poland and the Czech Republic account for two-thirds of EU coal use for power. In Germany, where coal and gas competition is more intense due to capacity availability, generation costs of gas and coal are moving in the same range. Therefore, small movements in fuel prices can change the relative competitiveness of coal and gas, and hence, of coal demand. With this uncertainty in mind, we expect coal demand to increase by only 4% in 2021, mostly pushed by the recovery of industrial consumption. This increase is a long way from reversing the 18% decline in demand in 2020.

A limited rebound for coal in the European Union in 2021 is primarily driven by economics, but recent political announcements imply continued declines in coal use. Throughout 2020 there were frequent announcements of green stimulus packages, zero emissions targets by mid-century, and plans to downsize coal generation capacity.