Global Coal Demand Set to Rise Amid Gas Supply Disruptions

The International Energy Agency forecasts that global coal demand will expand by 1.2% in 2026, reaching a total of 8.94 billion tonnes. This upward revision marks a reversal from the previous trend of declining usage, primarily driven by significant disruptions in the natural gas supply chain. The Mid-Year Update 2026 highlights that geopolitical instability has forced several major economies to rely more heavily on coal-fired power generation to meet electricity needs.

The primary catalyst for this shift is the reduction in liquefied natural gas shipments resulting from the closure of the Strait of Hormuz. Countries with substantial gas-fired power fleets and available coal capacity, including Europe, Japan, South Korea, and China, have increased coal combustion to offset the energy gap. Additionally, high oil prices have prompted China to utilize more coal in chemical production, further tightening the global supply-demand balance.

Weather Patterns Impact Asian Consumption

Climatic factors are also contributing to the increased demand in Asia. Forecasts indicate a strong El Niño weather pattern will persist, leading to higher cooling requirements in major consuming nations such as India and Vietnam. Concurrently, reduced hydropower output due to these weather conditions has necessitated a greater reliance on thermal coal to maintain grid stability, adding further pressure on global coal stocks.

Supply Constraints Drive Price Increases

Despite the demand surge, global coal production is expected to remain below the record high set in 2025. This supply-side constraint is largely attributed to a decline in Chinese output following safety inspections triggered by a major mine accident in May. The combination of rising consumption from multiple regions and limited production growth has created a tighter market, resulting in higher coal prices worldwide.

Market Dynamics Reflect Strategic Substitution

This shift underscores a strategic substitution effect where coal serves as a critical backup for unstable gas supplies. The data from GN auto stocks/energy-stocks: natural gas demand indicates that energy security concerns are overriding previous decarbonization trajectories in the short term. As the conflict affecting the Strait of Hormuz continues, the reliance on coal is likely to remain elevated, impacting both utility operators and mining companies globally.