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Coal demand in India, the world’s second largest consumer of the critical commodity, is expected to rise by 3.5 per cent annually till 2026 topping 1,397 million tonnes (mt), the International Energy Agency (IEA) said on Friday.
“India becomes the driving force behind the upward pressure on global coal demand through to 2026, even if the global trend is decided in China. For the forecast period until 2026, we estimate Indian coal demand to rise by 3.5 per cent annually to 1,397 mt, with growth in every coal grade,” IEA said in its latest coal report.
Coal demand in India, which accounted for 14 per cent of the global demand, increased by 9 per cent Y-o-Y, or 97 mt, totalling 1,162 mt. In 2023, the demand is expected to have increased by 8 per cent, or 98 mt.
Reliance on coal
Despite having a target of achieving 50 per cent power generation through non-fossil fuel sources by 2030, India would require additional coal-fired generation capacity to meet the growth in electricity demand and ensure security of supply.
Against this background, India’s latest National Electricity Plan foresees between 19 gigawatt (GW) and 27 GW of additional coal capacity up to 2027, depending on the scenario, despite about twice the capacity already being in the project pipeline.
“For the next three years, our model forecasts annual growth in coal consumption for power generation of 2.4 per cent, whereas renewable generation is forecast to grow by 12 per cent annually,” IEA said.
It estimates a moderate increase in coal for power generation of 69 mt to 2026, the total reaching 1,006 mt.
Non-power sector
Coal for non-power purposes is expected to surge significantly, with industrial production set to increase annually by 6 per cent between 2024 and 2026, the report said.
“Given the focus on infrastructure, we expect a strong increase in cement production, being one of the main drivers of growth in non-power thermal coal and lignite demand,” it added.
For instance, IEA said that the Adani Group is aiming to double its cement production capacity by 2028 up to around 140 million tonnes per annum (mtpa). Similarly, UltraTech is currently running a cement capacity of about 132 mtpa and is seeking to reach 160 mtpa soon.
“Together with consistently increasing steel demand driving consumption of steam coal (direct iron reduction) and met coal (blast furnace route), we estimate non-power coal consumption of 391 mt in 2026, growing 21 per cent over the three-year period,” the agency projected.
Aligned with the economic outlook, India’s industrial output has also been rising strongly in 2023, pushing up demand for thermal coal and lignite in non-power applications, like cement and direct iron reduction.
“Accordingly, we estimate non-power thermal coal and lignite consumption to have risen by 12 mt in 2023, to 243 mt. Met coal has the smallest share of Indian coal consumption, with an expected total of 81 mt in 2023,” IEA said.
Like other coal grades, met coal consumption is growing as steel production surged through 2023, it added.
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