Covid-19 weighs on global coal burn in 1H

Author Firat Ergene, Senior Reporter

Coal consumption in key markets slipped during the first half of 2020 as a late recovery in China’s coal burn failed to offset weakness in the earlier periods of the year.

Monthly coal-fired output, GW

Click image to view full scale

Combined coal-fired generation in China, France, Germany, India, Japan, Spain, Taiwan, Turkey, the UK, South Korea and Vietnam fell by nearly 30GW, or 4pc, on the year to 690GW, according to Argus estimates based on data from power generators and grid operators.

This implies a 40mn t drop in consumption of NAR 6,000 kcal/kg-equivalent coal to 1.13bn t, assuming a unit efficiency of 38pc.

This was in line with a sharp drop in overall power output, which fell by 56GW, or 4pc, to 1.3TW in January-June. India and China, the world's two biggest coal consumers, registered the sharpest drops — 11.7GW and 20.6GW, respectively.

Monthly coal-fired generation in selected countries

Click image to view full scale

Indian coal burn was stable on the year during the first quarter, but fell sharply in April-June as Covid-19 measures weighed on industrial activity.

Indian coal-fired output fell to 102GW in January-June, down from 119GW, Central Electricity Authority data show. Indian power demand and coal-fired output have started to recover in recent months and the latter is nearly back at seasonal norms in July, with the year-on-year deficit narrowing to 3GW in July.

But India's imports are still likely to fall this year — even if coal demand fully recovers or grows — as inventories remain at historic highs.

The decline in China's coal consumption was smaller, thanks to a swift recovery in power demand in the second quarter. China's overall power generation was 3pc down on the year in January-June, at 755GW, while estimated coal-fired output was only 0.5pc, or 2.5GW, lower on the year, at 505GW.

The recovery in thermal output in southern coastal provinces — with the biggest seaborne coal intake — was strong enough to lift the national total in January-June. A jump in Guangdong province's electricity demand in May pushed up the call on thermal output, and overall coal-fired generation in the coastal regions of Guangdong, Guangxi, Zhejiang, Fujian and Hainan rose by 1.8GW to 90.4GW in January-June.

Annual change in monthly coal burn in selected countries, GW

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The decline in coal-fired output was also less severe elsewhere in Asia-Pacific.

Japanese coal-fired output fell by 1GW to 30GW during the first half of the year, despite power demand falling more sharply. Increasingly competitive costs for coal-fired generation and new capacity additions made demand for the fuel more resilient than demand for LNG.

Lower oil prices might boost oil-linked LNG's competitiveness later this year, but lower nuclear availability could also boost overall demand for fossil fuel-based generation in some months.

South Korean coal demand was hit hard by plant suspensions in the first quarter, but was more resilient in April-June as capacity was restored and the fuel remained competitive against gas. But full-year consumption is still likely to be down sharply as recovering nuclear and more competitive gas prices create headwinds.

Plant restrictions weighed on Taiwanese coal burn. Coal-fired output fell by 500MW on the year to 9.4GW in January-June as state-controlled Taipower's 5.5GW Taichung plant faced pressure from the local government to cut its coal consumption.

But Vietnam's coal-fired generation continued to rise as new capacity launched and hydro generation weakened. State-owned generator EVN has not disclosed figures for June, but coal-fired output is likely to have exceeded 16GW in January-June, up from 14GW a year earlier.

Turkey bucked the trend in the Atlantic basin, with coal-fired output rising in January-June.

Coal-fired output rose by 730MW on the year to 6.4GW — with little impact from the pandemic, as the collapse in power demand coincided with hydro output's peak spring season, when coal burn is typically low anyway.

The country's coal imports could reach a record high this year as the fuel remains well ahead of gas in the generation merit order and is unlikely to face serious competition from gas for the rest of 2020.

Elsewhere in Europe, coal consumption continued to fall sharply, as competitive spot gas pricing and firmer emissions allowance values weighed on margins for coal-fired units.

Average coal-fired output in Germany, France, Spain and the UK fell to 4.9GW in January-June from 9.1GW a year earlier. Germany and Spain led the falls — coal only makes up a small portion of generation in France and the UK. German coal-fired output shrank to 3.4GW, and Spain's to just 740MW from 1.9GW.

This analysis comes from Argus Coal Daily International. Learn more about the service here.

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