Chennai: Industrial production has been impacted by high energy prices in India and this could weigh on economic growth of the country. Natural gas and coal prices are expected to remain at high levels through the start of 2022, finds the World Bank.
Industrial production in China and India has been negatively impacted by electricity shortages amidst insufficient electricity availability. Higher energy prices could therefore also weigh on economic growth, which would in turn reduce demand for natural gas and coal.
In a report, the World Bank said natural gas and coal prices are expected to remain at high levels through the start of 2022 but then decline as supply constraints ease and production increases. How-ever, additional bouts of price volatility remain a distinct possibility.
European natural gas prices and Australian coal prices are forecast to decline 14 per cent each in 2022 and then fall a further 27 per cent and 25 per cent, respectively, in 2023. In contrast, after doubling in 2021 natural gas prices in the United States are expected to see only a marginal decline, given continued high demand for US LNG exports. Asian delivered natural gas prices, which saw the smallest rise in 2021, are expected to see a relatively modest fall in 2022.
According to the bank, as the global economy has started to recover from the pandemic, demand for natural gas and coal rebounded, both for electricity generation and industrial purposes. In China, electricity use rose 11 per cent between January and August 2021 while in India it was up 17 per cent year-on-year in August 2021.
India’s imports of coal from Australia reached an all-time high in July.
The global production of coal, meanwhile, fell 5 per cent in 2020 and has been slower to pick up than consumption. This led to energy prices soaring in the September quarter.