Coal Production and Consumption Report 2023

Updated on April 19, 2023

Global Coal Production

According to most recent data, global coal production is expected to rise by 5.4% to reach 8,318 metric tons in 2022. This represents a new all-time high and is significantly higher than the previous record set in 2019. The increase is a result of economies recovering from the pandemic-induced demand drop in 2020, which saw a 3.9% increase in coal production to 7,888 Mt in 2021. China and India were the main contributors to this growth, with China seeing a 4% increase in production (153 Mt) and India experiencing a 6% increase (48 Mt).

Steam coal and lignite accounted for the majority of the production increase, with 98% of the 295 Mt increase coming from these sources. Together, these fuels made up around 86% of total production. The report suggests that the trajectory for global coal production will continue to rise in the short term, reaching a peak in 2023. However, by 2025, coal production is expected to fall to 8,221 Mt, which is below the 2022 levels.

The decline is mainly attributed to China’s plateauing coal production in the coming years, and the expected large declines in other regions such as the United States (-92 Mt), the European Union (-68 Mt), Indonesia (-40 Mt), and Russia (-13 Mt). Despite this, India’s coal production is expected to continue to grow (+128 Mt) and partially offset the decline in other regions.

<b>Global Coal Production</b>

American coal producers face difficulties in increasing their coal production

Coal production in the United States is projected to rise by only 2% in 2022, despite high export prices for coal, steep prices for gas, and low inventories. This means that the United States is no longer considered a swing supplier. Although coal production in the Western region is expected to grow by 6%, the Appalachian region (-0.2%) and the Interior region (-2.8%) are expected to experience a decrease.

As demand for thermal coal in the US continues to fall, and there are shortages of personnel and a lack of investment, we anticipate that coal production will continue to decrease in the coming years. We predict an annual decline of 6.1% until 2025, at which point production will hit 443 Mt.

<b>American coal producers face difficulties in increasing their coal production</b>

Production Capacity

In 2022, several coking coal mines and one thermal coal mine will have commenced operations in the United States. Ramaco Resources has boosted its metallurgical coal production by about 2.6 million metric tons per year. The increase in capacity was driven in part by the expansion projects at the Berwind and Elk Creek complexes, and in part by the commissioning of two new mines: the Knox Creek mine, which has a capacity of 0.7 million metric tons per annum, and the Big Creek 2 mine, which has a capacity of 0.2 million metric tons per annum. In addition, Ramaco Resources acquired Ramaco Carbon LLC at the start of the year and began producing coal in its Brook Mine, which has a capacity of 0.25 million metric tons per annum.

Peabody has reopened its Shoal Creek mine, which was shut down in 2020 due to low demand. The mine is currently ramping up coking coal production and is expected to reach its maximum production capacity of 2.1 million metric tons per annum soon. Moreover, there are additional coking coal projects with a combined capacity of 4.5 million metric tons per annum in the more advanced stages of development. Among these, North Central Resources’ Longview coal mine stands out with a total capacity of 3 million metric tons per annum. However, the start of production has been pushed back from the end of 2022 to mid-2023.

<b>Production Capacity</b>

Global coal demand

After a sharp decline the previous year due to the COVID-19 pandemic, global coal consumption rebounded by a strong 6% to 7,929 million tonnes (Mt) in 2021. This was driven by a robust economic recovery, particularly in countries such as China and India, which rely heavily on coal. Additionally, higher natural gas prices prompted a wave of fuel switching to coal, leading to an 8% increase in power generation to 5,344 Mt.

Furthermore, increased industrial activity boosted coal consumption for non-power applications by 2.2% to 2,585 Mt. However, the United States saw a significant decline in coal consumption (-6%/-31 Mt) due to the ongoing shift from coal- to gas-fired power generation and years of underinvestment in coal production.

<b>Global coal demand</b>

 

US coal demand

Despite a brief resurgence in 2021, coal-fired power generation in the United States continues its downward trend as renewable energy expansion accelerates and the coal power fleet shrinks. More than 6 GW of coal-fired capacity was retired or converted in 2021, and nearly 13 GW are scheduled to close in 2022. Owing to logistical issues and high prices in global markets, limited access to coal has placed further strain on coal-fired generation, driving up the share of renewables and natural gas in electricity generation, despite the latter’s higher cost. Coal’s portion of electricity generation is projected to drop from 23% in 2021 to 20% in 2022. Overall, a 6.3% decrease in coal consumption to 465 Mt is predicted, in line with a reduction in coal-fired electricity generation, which accounts for 92% of total coal usage.

<b>US coal demand</b>

 

Thermal coal trade

Following the decline caused by the Covid-19 pandemic, the thermal coal trade rebounded in 2021 to reach 1,025 Mt, driven by the economic recovery and higher gas prices. Seaborne trade accounted for 94% of the total. However, despite the high coal prices, not all coal-exporting countries were able to expand their exports. Indonesia and the United States were able to increase their volumes significantly, while Colombia and South Africa experienced a sharp decline in exports. Meanwhile, Russia’s export volume remained steady at 2020 levels. Indonesia, in particular, increased its volumes by 7% to 432 Mt, returning to a growth trajectory after lower demand from India in 2020. However, the increase in US exports may be temporary, as the higher exports came at the cost of falling stocks.

<b>Thermal coal trade</b>

Met coal trade

Metallurgical coal, which accounts for only 23% of the global coal trade, is much more dependent on international markets than thermal coal. In 2021, global demand for met coal was met by imports, which made up around 29% (324 Mt) of the total demand, with around 91% of those imports being seaborne. Unfortunately, metallurgical coal exports have fallen for the second year in a row, dropping to 308 Mt in 2021.

On the export side, the met coal market is heavily concentrated, with Australia dominating as the largest exporter, holding a market share of around 56% in 2021. The United States, Russia, and Canada follow with market shares of 13%, 13%, and 9% respectively, which together account for around 91% of all metallurgical coal exports.

<b>Met coal trade</b>

Record high international coal prices observed

Thermal coal prices saw a strong rebound in 2021 after falling to 14-year lows the previous year. As the world’s economies emerged from the COVID-19 pandemic, a supply-demand imbalance was created, resulting in coal and electricity shortages in China and India, among others. This led to most international thermal price indices reaching all-time highs in October. High-grade thermal coal with a calorific value of 6,000 kcal/kg saw Newcastle free on board (FOB) prices and the API2 prices (the index for coal deliveries to Europe) hit record highs of USD 253/t and USD 254/t, respectively. However, prices started to ease towards the end of the year as China ramped up production and coal inventories returned to normal levels.

<b>Record high international coal prices observed</b>

The value of the US dollar impacts the cost of coal imports, with a strong appreciation leading to further increases in expense

The value of a country’s currency against the US dollar plays a crucial role in the affordability of coal imports since international coal trade contracts are mostly negotiated in dollars. The exchange rates of major coal-importing countries have been relatively stable in recent years, with slight fluctuations. However, some currencies, such as the Turkish lira, have experienced significant depreciation. The loose monetary policy of the Federal Reserve has led to the appreciation of currencies like the Chinese yuan, the euro, and the British pound in 2020 and 2021.

In 2022, the US Federal Reserve raised interest rates in response to increasing inflation rates, causing the dollar’s relative value to rise against other currencies. This development further exacerbates the energy crisis, especially for countries heavily reliant on high energy imports. Several currencies, including the Japanese yen, euro, Korean won, British pound, and Polish zloty, lost 10-16% of their value in the first eleven months of 2022. The Turkish lira’s depreciation also accelerated, resulting in a loss in value of more than 46% compared to the US dollar.

<b>The value of the US dollar impacts the cost of coal imports, with a strong appreciation leading to further increases in expense</b>

High prices have little impact on most coal mines in the United States

The vast majority of coal mined in the United States is consumed domestically. Long-term contracts with fixed prices dominate the domestic coal market, which means that many US coal mines are unable to fully benefit from the current high world market prices. From January 2021 to September 2022, the average cost of delivering coal to US power plants has increased by only about 31%, leaving some mine operators struggling to cover their rising operating costs. In an attempt to gain more price flexibility and offset their elevated production costs, some surface mines have started to tie sales agreements and prices to diesel indexes. This approach could help mine operators adjust their prices to better match the fluctuations in production costs.

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<b>High prices have little impact on most coal mines in the United States</b>

Despite the rise in coal supply costs in 2021, the increase in prices was even higher, resulting in improved profitability

The cost of producing metallurgical coal is typically higher than that of thermal coal due to several factors. First, metallurgical coal is primarily extracted from underground mines, which is a more costly and complex process than surface mining, where most thermal coal is obtained. Furthermore, metallurgical coal is often mined from smaller coal mines, making economies of scale harder to achieve. Another reason for the higher production costs of metallurgical coal is that it requires more preparation than thermal coal to meet specific quality standards, which results in additional expenses.

<b>Despite the rise in coal supply costs in 2021, the increase in prices was even higher, resulting in improved profitability</b>

<b>Despite the rise in coal supply costs in 2021, the increase in prices was even higher, resulting in improved profitability</b>

Fuel costs rose in many countries

<b>Fuel costs rose in many countries</b>

Most countries are experiencing a rise in labor costs

<b>Most countries are experiencing a rise in labor costs</b>

Other exporters’ competitiveness improves with a strong US dollar.

The global coal market is heavily influenced by currency exchange rates, as they can significantly impact the competitiveness of exporters. According to industry experts, coal trading contracts are predominantly denominated in US dollars, while operating costs are paid in local currencies. This means that when local currencies experience a depreciation against the US dollar, it can result in reduced operating costs, increasing the competitiveness of coal producers. With the current state of the global economy and the ongoing fluctuations in currency exchange rates, this trend is expected to continue to shape the coal market in the coming years.

<b>Other exporters’ competitiveness improves with a strong US dollar.</b>

Metallurgical coal investments remain the top priority for coal investors

In the midst of global efforts to reduce carbon emissions, the steel industry remains heavily reliant on coal-based production. Despite promising alternatives such as hydrogen-based steelmaking, these technologies are not yet available on a large enough scale to meet demand and remain too expensive for practical implementation. As a result, coal remains the primary source of steel production, accounting for roughly one-third of advanced coal export mining projects.

Meanwhile, major mining companies continue to shift their focus away from thermal coal. Industry giants such as Rio Tinto and Anglo American have already sold off most of their coal mines, with BHP now following suit by announcing its intention to sell its Mt Arthur thermal coal mine. However, despite efforts to find a buyer, the company has not yet succeeded and instead applied for a permit to operate the mine beyond 2026 until 2030.

<b>Metallurgical coal investments remain the top priority for coal investors</b>

Coking coal projects are in the spotlight in the United States

The US coal industry is showing signs of growth, as several new mines have begun operations in 2022. Ramaco Resources, a leading coal producer, has expanded its metallurgical coal production capacity by over 2.6 million tons per annum (Mtpa) through its Berwind and Elk Creek complexes, as well as through two new mines: the Knox Creek mine with a production capacity of 0.7 Mtpa and the Big Creek 2 mine with a production capacity of 0.2 Mtpa. In addition to this, Ramaco Resources also acquired Ramaco Carbon LCC earlier this year and has commenced production at its 0.25 Mtpa thermal coal Brook Mine. The increase in production is a welcome development for the US coal industry, which has faced challenges in recent years due to competition from natural gas and renewable energy sources.

Year and Quarter Production Imports Waste coal supplied Producer and distributor stocks Consumption Exports Consumer Stocks Losses and unaccounted for
2016
January-March 173,225 2,698 2,829 35,207 166,448 14,153 197,755
April-June 160,853 2,292 2,174 32,932 160,278 14,223 188,060
July-September 195,101 2,733 2,880 27,282 223,358 12,552 162,318
October-December 199,186 2,124 2,256 25,309 180,987 19,343 167,681
Total 728,364 9,846 10,138   731,071 60,271 2,449
2017
January-March 197,138 1,915 2,918 25,190 173,712 22,540 166,774
April-June 187,098 2,197 2,123 23,430 166,866 21,836 163,264
July-September 196,440 2,333 2,609 23,430 203,482 24,571 145,060
October-December 193,933 1,357 2,301 23,999 172,796 27,998 142,957
Total 774,609 7,803 9,951 716,856 96,945 4,596
2018
January-March 187,743 1,367 2,996 24,736 168,149 27,528 130,682
April-June 180,829 1,546 2,122 22,997 156,607 30,538 125,809
July-September 194,731 1,439 2,695 22,537 194,219 29,602 105,478
October-December 192,863 1,602 2,618 21,692 169,131 28,575 108,104
Total 756,167 5,954 10,431 688,105 116,244 5,363
2019
January-March 179,817 1,689 2,649 24,160 157,746 25,213 101,990
April-June 179,781 1,604 1,946 24,529 129,609 25,929 122,358
July-September 181,461 1,681 1,576 27,714 167,226 21,960 116,478
October-December 165,250 1,723 1,833 31,320 131,962 20,663 133,940
Total 706,309 6,697 8,003 586,543 93,765 5,238
2020
January-March 149,198 1,339 1,862 30,829 109,626 19,911 150,413
April-June 116,218 1,127 1,392 29,510 96,336 14,848 155,189
July-September 135,881 1,345 1,825 25,537 148,290 15,260 133,018
October-December 134,137 1,326 1,801 23,640 122,441 19,048 136,182
Total 535,434 5,137 6,880 476,693 69,067 7,129
2021
January-March 140,130 1,074 2,077 22,629 138,861 20,740 113,926
April-June 142,674 1,530 1,560 22,361 124,505 22,017 113,366
July-September 148,272 1,134 2,024 19,042 167,886 20,595 82,107
October-December 146,355 1,650 2,002 19,013 114,358 21,763 96,343
Total 577,431 5,388 7,663 545,610 85,115 4,223
2022
January-March 148,992 1,322 1,773 20,953* 133,706 20,186 90,478
April-June 145,658 1,636 1,742 20,927* 117,892 23,001 91,539
July-September 154,270 1,970 1,896 17,515* 145,146 20,739 84,515
Total 448,920 4,928 5,411 396,744 63,926 11,915
2021 Jan-Sep 431,076 3,738 5,661 431,253 63,352
2020 Jan-Sep 401,297 3,811 5,079 354,252 50,018
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*Estimates

US Coal Production 2016-2022 (thousand short tons)

Year January-March April-June July-September October-December Total
2016 173,225 160,853 195,101 199,186 728,364
2017 197,138 187,098 196,440 193,933 774,609
2018 187,743 180,829 194,731 192,863 756,167
2019 179,817 179,781 181,461 165,250 706,309
2020 149,198 116,218 135,881 134,137 535,434
2021 140,130 142,674 148,272 146,355 577,431
2022 148,992 145,658 154,270 448,920
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Total Coal Consumption Worldwide(Mt) 2020-2025

Region/Country 2020 2021 2022 2025
Asia Pacific 5,830 6,153 6,251 6,492
China 4,045 4,232 4,250 4,337
India 905 1,033 1,103 1,220
Japan 174 174 177 158
Southeast Asia 356 361 375 422
North America 462 529 502 410
United States 430 496 465 383
Central and South America 48 50 45 37
Europe 585 649 685 552
European union 392 449 478 371
Middle East 13 12 10 7
Eurasia 344 348 350 351
Russia 217 225 236 227
Africa 195 189 180 190
World 7,477 7,929 8,025 8,038
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Total Coal Production Worldwide(Mt) 2020-2025

Region/Country 2020 2021 2022 2025
Asia Pacific 5,747 5,947 6,358 6,456
China 3,789 3,942 4,237 4,237
India 758 805 893 1,021
Australia 474 470 446 450
Indonesia 566 569 622 582
North America 538 579 594 494
United States 486 524 535 443
Central and South America 61 66 65 62
Europe 447 485 519 433
European union 302 332 357 289
Middle East 2 2 2 2
Eurasia 539 564 538 537
Russia 402 437 404 392
Africa 260 245 243 238
World 7,592 7,888 8,318 8,221
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Sources:

International Energy Agency – www.iea.org

US Energy Information Administration Quarterly Coal Report – www.eia.gov

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