Indonesia, China and India: Asia's energy trio keeps coal burning

When China's coal imports declined for the first time in 2014 since the 2008 recession, an International Energy Agency report questioned whether Chinese coal consumption had peaked in 2013 and said, "the golden age of coal in China seems to be over."

In the same year, Indonesia's coal exports fell for the first time since the onset of strong Indonesian export growth in the 1990s. This led to several forecasters and industry observers raising concerns over export feasibility amid Chinese decline, rising domestic demand and increasing regulatory constraints.

India wasn't left alone from forecasts and predictions of waning coal consumption all these years, with a former coal minister, Prahlad Joshi, in an early 2020 statement putting a full stop prediction to coal imports over 2023-24, which was later changed to 2025-26. Even then, industry participants said it is highly unlikely that India will stop importing coal for two key reasons: domestic coal quality isn't the best as they are high-ash and high-moisture, with lower heating value; and several power plants using imported coal are nowhere near the end of their lifecycle.

Entering 2025, Indonesia, China and India are actively working to ensure that coal remains a vital energy source. They are challenging nearly all predictions made a decade ago, with each country on track to achieve new record highs, representing approximately 70% of global coal consumption and seaborne trade.

"For mature economies like Europe and the US, you can argue that coal will be phased out by 2035 if not by 2030, but China, India and Indonesia are a different story," Carlos Fernandez Alvarez, IEA's senior coal analyst, told S&P Global Commodity Insights. "These countries have a lot of coal, need to cater to the mammoth electricity demand due to fastest growing population, and it's difficult to not use your domestic natural resource abundantly available despite the push to phase coal out."

While power generation demand was estimated correctly for Indonesia and China, Alvarez said no one expected a sudden surge in demand from the nickel industry.

"I think the mistake is to catch the last-minute happenings and think of them as trends," Alvarez said. "China's post-COVID demand revival has been incredible and this has changed the dynamics of how coal will be consumed in the years to come."

Record high consumption

Indonesia produced 755 million mt of coal from January to November and is on track to surpass its 2023 record output of 775 million mt, exceeding the government's target of 710 million mt for 2024, according to the latest MINERBA One Data. The IEA's mid-year update estimated Indonesia's 2024 coal exports at 534 million mt, up from the record just above 500 million mt in 2023, expecting it to account for almost half of global thermal coal exports this year.

From January to November, China imported 490 million mt of coal, up 14% year on year and higher than the record imports of 474 million mt in 2023, according to customs data. At nearly 4 billion mt over January to October, domestic production is likely to exceed 2023's 4.5 billion mt, accounting for over 55% of the world's total consumption.

"While some forecasts over 2010-2015 suggested that coal consumption in China might decline significantly, actual trends have shown otherwise," said Dileep Srivastava, independent director and corporate secretary at Indonesia's largest coal miner, PT BUMI Resources. "Despite efforts to transition toward cleaner energy sources, coal continues to remain a crucial component of China's energy mix."

"China's robust economic growth and increasing urbanization have driven continuous demand for electricity, which coal has historically provided at scale and cost-effectiveness compared to alternative energy sources like renewables or natural gas," Srivastava said.

Meanwhile, as India's domestic coal production is on track to hit upward of 1 billion mt in 2024, imports have also been robust at 220 million mt so far in 2024, consistent with 2023. These imports comprise 70% thermal coal and 30% coking coal.

Slow renewables, stable coal pricing

While the pace of renewables capacity addition in India is impressive, a gap remains in utilization as costs are nowhere close to thermal coal-fired electricity, said a senior power sector specialist at CERC, India's power regulator. Coal-based capacity at around 50% generates 75% of India's power demand, while renewable capacity at about 30% make up for less than 15%, according to data from India's power ministry.

Rangebound seaborne prices in 2024 have also worked in favor of coal, after prices saw extreme volatility following the pandemic and the onset of the Russia-Ukraine conflict.

Platts, part of Commodity Insights, assessed FOB Kalimantan 4,200 kcal/kg GAR -- the most liquid grade thermal coal traded in Asia -- between $50 and $55/mt since April, and was even tighter in Q3 and Q4 between $50 and $52/mt. From April to December, Platts-assessed FOB Newcastle 5,500 kcal/kg NAR hovered between $87 and $91/mt, while CFR India West 5,000 kcal/kg GAR remained in low $80s/mt.

"At a time when renewables are still far away from matching coal-fired generation, a stable coal pricing environment will certainly energy needs are fulfilled, which is basic," said Priyadi, chairman of the Indonesian coal mining association APBI-ICMA. "Indonesia's plans to green energy will continue to pick up pace, but coal will remain the mainstay for decades to come. Forecasts should be made on how different forms of energy can survive, not just on when coal is going to be phased out."