Global Coal Demand Tops 8.94 Billion Tonnes in 2026

Global coal consumption is projected to hit a record 8.94 billion tonnes in 2026, reversing a previous forecast of decline. The International Energy Agency attributes this 1.2% year-over-year increase to energy market disruptions caused by the Middle East conflict. Sharp spikes in natural gas prices are prompting utility operators to switch from gas-fired fleets to coal for electricity generation.

The shift is driven by a significant drop in liquefied natural gas shipments through the Strait of Hormuz. Although coal does not transit this route, the resulting gas price inflation has made coal a more economical fuel source. Countries with spare coal capacity, including Europe, Japan, South Korea, and China, have increased coal usage beyond earlier expectations to maintain power grid stability.

Regional Drivers Boost Industrial Consumption

Beyond electricity generation, China has expanded coal use for chemical production due to high oil prices. In Asia, a strong El Niño weather pattern is expected to further support demand. Higher cooling needs in India and Vietnam, coupled with reduced hydropower output from lower rainfall, create additional pressure on coal-fired plants to meet peak load requirements.

These factors contribute to tighter global coal markets. Import-dependent nations are increasing purchases, while domestic output constraints in major producing countries reduce available supply. The combination of rising demand and limited production growth is exerting upward pressure on coal prices across international trading hubs.

Production Caps Inventory Buildup

Global coal production is expected to decline in 2026 after reaching a peak in 2025. Output will remain above 9 billion tonnes for the third consecutive year, but growth stalls due to reduced Chinese production. Safety inspections following a major mine accident in May have led to significant output cuts in the world’s largest producer.

The narrowing gap between production and consumption is easing the massive inventory buildups seen in recent years. As stocks draw down to meet the revised demand forecast, market liquidity tightens. This reduction in available physical coal supports higher spot and futures prices for importers seeking long-term contracts.

Strait Recovery Determines 2027 Outlook

The 2027 coal outlook hinges on the status of the Strait of Hormuz. If LNG shipments recover and natural gas prices fall to pre-war levels, global coal demand may decrease as utilities revert to cleaner, cheaper gas. However, if the strait remains largely closed to LNG traffic, coal demand could increase further.

In the scenario where gas remains expensive, global coal output is set to rise slightly in 2027. This would follow a rebound in Chinese production as safety inspections conclude and normal operations resume. The IEA notes that significant uncertainty remains, with the final trajectory of coal markets dependent on geopolitical developments in the Middle East.