The International Energy Agency (IEA) predicts that global coal production will grow this year as demand for fossil fuels remains at record highs.
The report forecasts that the world’s coal output will reach a record 9.2-billion tonnes in 2025, with miners set to increase global supply in response to a strong demand forecast.
The findings offer a reality check in terms of the world’s progress towards a clean energy transition — a shift in which SA, which is among the world’s top 15 largest greenhouse gas emitters, plays a critical role.
Last year, global demand for coal rose 1.5% year on year to a new record of 8.79-billion tonnes, even as many countries enacted more stringent environmental policies and poured funding into renewable energy infrastructure.
The strong projected demand for coal offers some tailwinds to the economy, lending support to mining minister Gwede Mantashe’s view that “king coal is back”.
More than 70% of SA’s energy demand is generated from coal, with the sector employing nearly 100,000 people and generating more than R250bn in revenue in 2022.
A sudden drop in coal demand could wreak havoc among those employed by the sector, with a recent policy brief by Trade and Industrial Policy Strategies showing that most SA coal workers risk being unable to transfer their skills to nonmining sectors.
Over the next decade, SA will progressively phase out 22GW of coal power under the country’s Integrated Resource Plan, with the Camden, Grootvlei and Hendrina coal plants all set to shut down in 2027-30.
In the interim, however, local coal exporters can expect demand to remain firm. The IEA predicts that global demand will increase slightly this year and remain at record highs in 2026.
The strong demand forecast is particularly encouraging given the tough market conditions miners have had to contend with this year. In the past 12 months, coal prices have slumped more than 18% as trade wars, policy uncertainty and investment in renewables weigh on demand.
Last year, a drop in export coal prices saw Exxaro report a 36% slump in annual headline earnings per share, while Glencore posted a net loss of $1.6bn for the year to end-December.
In April, Glencore announced a 5-million tonne to 10-million tonne production cut at its Colombian Cerrejon mine as geopolitical tension, policy changes and trade wars continue to disrupt the global energy market.
SA has become a big player in international coal markets in recent years. Amid Transnet’s improved freight rail performance, the Richards Bay Coal Terminal last year exported 52.08-million tonnes, its highest level in three years.
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