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Q2 | 2025
PCR GROUP | Singapore
Coal Market Analysis: Global Demand and Market Dynamics
Despite global trends towards renewable energy, coal continues to demonstrate remarkable resilience, maintaining a critical role in global energy markets. Over the past two decades, global coal demand has nearly doubled, highlighting its persistent appeal driven primarily by economic viability, abundant availability, and critical energy security needs. The global coal market, instead of shrinking, has reached record levels of consumption, defying numerous forecasts that predicted a structural decline.
China and India, the world's largest coal consumers and producers, exemplify the enduring centrality of coal in emerging economies. In China, coal's role has expanded dramatically alongside rapid industrialization and urbanization. Even as renewable energy capacities have significantly increased, China’s electricity demand continues to outpace these advances. Notably, China constructed new coal-fired power plants at its fastest rate in almost a decade, emphasizing the indispensable role coal plays in meeting the nation’s enormous energy needs. The province of Shanxi, which produces approximately a quarter of China’s coal, illustrates the socio-economic complexities associated with coal dependence. Approximately 3 million jobs and 30% of the province's economy depend directly on coal production, creating immense challenges in transitioning away from coal without causing significant social disruption and job losses.
India, similarly, maintains a substantial reliance on coal, drawing approximately three-quarters of its electricity from coal-fired plants. Despite billions invested in solar and wind energy, the rapidly growing demand for electricity due to industrial growth, infrastructure development, and improvements in living standards consistently outstrips the capacity of renewables to meet national requirements. The Indian government's strategic plans include significantly boosting domestic coal production, anticipating growth rates of 6-7% annually, to meet escalating electricity needs. Coal India, the state-owned mining giant, has been reopening dormant coal mines and initiating new mining projects, reflecting a long-term commitment to coal as a crucial resource to prevent energy shortages and maintain economic momentum.
The robustness of global coal demand is further amplified by unexpected geopolitical and economic disruptions. The Covid-19 pandemic initiated substantial economic stimulus packages aimed at recovery, particularly in heavily industrialized nations such as China. These packages prioritized infrastructure and industrial expansion, consequently bolstering coal consumption. Moreover, geopolitical tensions, notably the Russian invasion of Ukraine, disrupted global energy markets by driving up natural gas prices, thereby making coal relatively more attractive economically. This renewed focus on energy security has led nations, even those previously committed to phasing out coal, to reconsider coal's strategic value in their energy portfolios.
In developed economies, the scenario is varied. While countries like the UK, Austria, and Portugal have successfully eliminated coal from their energy systems, these reductions are vastly overshadowed by increased coal consumption in Asia. Additionally, a noticeable shift in investor sentiment towards coal can be observed. Initially, financial institutions and major asset managers distanced themselves from coal-related investments due to environmental concerns. However, this stance has softened significantly in recent years, reflecting a pragmatic recognition of coal’s ongoing necessity in global energy strategies. Industry leaders have openly acknowledged coal’s renewed acceptance as an essential component of energy transitions, reversing previous trends driven by environmental, social, and governance (ESG) criteria.
Economic analyses consistently highlight coal’s enduring advantages —cost-effectiveness, ease of storage, high energy density, and widespread availability. These attributes are particularly crucial for developing economies striving to achieve sustained economic growth and infrastructure development. The stability provided by coal-fired plants, especially in regions lacking sufficient natural gas reserves or renewable energy infrastructure, remains unmatched. Furthermore, the reliability of coal-fired power generation is critical in mitigating intermittent supply issues associated with renewable energy sources, notably wind and solar power, which are inherently variable in output.
Forecasting the trajectory of coal demand has proven challenging, with institutions like the International Energy Agency (IEA) repeatedly revising projections in light of unexpected demand resilience. Initially predicting coal's peak around 2013, subsequent forecasts have continually underestimated coal’s sustained market presence. Currently, rather than predicting an immediate decline, the IEA anticipates coal consumption to plateau and potentially increase slightly until at least the late 2020s, recognizing the fundamental drivers sustaining coal use.
Furthermore, the existing coal infrastructure in Asia, notably characterized by relatively young coal-fired plants, presents significant inertia against rapid phase-out. Asian coal plants, particularly in China, India, Indonesia, and Vietnam, are among the youngest globally, implying decades of potential operational lifespan remaining. This entrenched infrastructure not only limits immediate reductions in coal consumption but also influences energy policy decisions, emphasizing continued coal use due to sunk investments and the comparative cost advantage of operating existing coal plants versus building new renewable facilities.
Asia stands at the epicenter of a substantial and ongoing expansion in coal power infrastructure. China and India are notably leading this growth, with extensive new coal-fired capacity coming online at unprecedented rates. China alone, home to the world's largest coal power fleet of over 3,200 operational units, has significantly accelerated its coal-fired power plant construction, with recent data showing the highest pace of new projects in nearly a decade. In 2023, China authorized new coal plants amounting to several gigawatts of additional capacity, reflecting a strategic commitment to coal as a critical component of energy security.
India, similarly, exhibits substantial growth in coal-fired generation capacity, with approximately 54 gigawatts of new coal plants under construction or planned, alongside an additional 81 gigawatts in development. State-owned Coal India is aggressively expanding mining operations to fuel these plants, with anticipated domestic coal production growth rates between 6% and 7% annually up to at least 2030.
Other Asian economies, including Indonesia and Vietnam, have also witnessed remarkable increases, contributing significantly to the global rise in coal consumption. Indonesia currently operates one of the youngest coal plant fleets worldwide, with a median age of just 7 years across its 265 coal-fired units, suggesting decades of operational longevity ahead. Meanwhile, Vietnam, South Korea, and Bangladesh continue to expand their coal capacities, collectively adding tens of gigawatts in new coal power infrastructure. Looking ahead, the trajectory for coal power expansion in Asia appears set to continue robustly, driven by energy demands associated with rapid economic growth, industrialization, and urbanization. Forecasts indicate that, without significant policy interventions or revolutionary technological breakthroughs, Asia’s coal-fired power capacity will likely increase steadily over the coming decades. Analysts estimate that coal consumption will not only persist but possibly rise slightly each year, reflecting ongoing economic priorities and energy security considerations.
In conclusion, coal remains deeply integrated into global energy markets due to a combination of economic factors, geopolitical events, infrastructure investments, and socio-economic dependencies. Achieving meaningful reductions in coal consumption will require strategic, economically viable alternatives that address the complex web of dependencies currently sustaining global coal markets. The comprehensive transition from coal, therefore, remains a substantial and ongoing global economic and social challenge.
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Disclaimer:
This analysis is provided solely as an opinion by PT PCR INVESTMENTS INDONESIA. The information presented herein is intended for informational purposes only and should not be construed as investment advice, financial guidance, or any form of recommendation to buy, sell, or hold any particular asset or investment. Readers are encouraged to conduct their own due diligence or consult with a qualified financial advisor before making any investment decisions. PT PCR INVESTMENTS INDONESIA disclaims responsibility for any decisions made based on this summary or for any financial or other losses resulting from its use.