Due to liquidity constraints and lack of sales, coal mines and power plants are scaling down or halting their operations, which will significantly impact the sector’s growth outlook, says GlobalData, a leading data and analytics company.
In the UK, the effects of the COVID-19 pandemic have led the government to halt all but four of its coal-based power generating units. The collapse in demand for electricity during the lockdown combined with a greater supply of solar power has led to the UK not using coal-fired power plants for generating electricity for more than 20 days. Elsewhere in India, as a result of reduced demand, around forty coal-based power units with a capacity of 30 gigawatts (GW) have halted operations. Power plants are being forced to scale down operations and technologies with the lowest cost of electricity generation being given priority to dispatch electricity to the grid.
Somik Das, Senior Power Analyst at GlobalData, comments: “The reduced electricity demand due to the pandemic will have a bearing on coal consumption in developing countries. Markets such as China, India and Vietnam, where a significant portion of the installed generation capacity is coal-based, will witness decline in electricity generation from coal. Coal consumption in developed markets has already been low, but the ongoing drop in electricity demand combined with the drop in gas prices could further accelerate the closure of coal-based generation plants.”
India imposed a nationwide lockdown, which has caused disruptions and declarations of force majeure by several Indian ports, including Gangavaram port, one of the country’s largest for imported coal. Domestically, Coal India Ltd. (CIL) has seen a 10% fall in coal dispatches during March 2020. Chinese state-owned utility Guodian canceled coal cargoes of 3 million tons (MT) that it had already booked for delivery over April and June. Global demand for coal imports could decline by 7% by the end of this year due to the combined effect of the COVID-19 pandemic and stiff competition from gas.
Das added: “China and India are backing out from the global coal market due to ample domestic supply. International shipments of coal have declined over the past two months as governments around the world imposed social distancing and other measures to combat the spread of the COVID-19 virus. Meanwhile, coal continued to face fierce competition from the gas market, with gas-fired generation highly profitable in many countries in comparison to coal-based generation.”