For the first time in half a century, coal-fired power generation declined in both China1 and India in 2025, driven by the huge expansion of renewable energy in China and an early, unusually strong monsoon in India. Global steel production – the second-largest coal-consuming sector – also fell. Yet the world’s coal demand still rose by 0.3% to 8.84 billion tonnes (Bt), a new record, highlighting how declines in some major markets were offset by growth elsewhere. In the United States, strong electricity demand, higher natural gas prices and policy support drove an increase in coal consumption, interrupting the broad decline seen over the past two decades. Growth also came from coal-intensive industries, including nickel production in Indonesia and coal-to-chemicals in China.

Global energy markets have been shaken by the ongoing conflict in the Middle East. Although virtually no coal shipments pass through the Strait of Hormuz – as the Middle East is neither a major producer nor consumer of coal – the disruption has nonetheless affected coal markets by pushing up natural gas prices due to the plunge in LNG shipments through the Strait. This has in turn encouraged more coal-fired generation in countries with gas-fired power fleets and spare coal capacity. The effects of higher gas prices have been visible in China, Korea, Japan, Europe and beyond, with regulatory measures reinforcing the shift towards coal consumption in some markets. The use of coal to produce chemical products in China has also risen, with higher oil prices improving the economics of coal-based alternatives. However, the overall impact of this has been limited, since many Chinese coal-to-chemicals plants were already operating at high capacity.

A particularly strong El Niño weather phenomenon in 2026 is also expected to support coal demand by increasing cooling needs and reducing hydropower output in some major coal-consuming countries in Asia, such as India and Viet Nam. The IEA’s most recent annual Coal Market Report, published in December 2025, forecast a small decline in global coal demand this year. But since then, upward revisions – mainly reflecting the impact of the Middle East conflict and weather-related factors – have reversed the outlook. This Mid-Year Coal Update now forecasts that global coal demand will grow by 1.2% in 2026, bringing total consumption to 8.94 Bt and marking another record year.

The volatile situation in the Strait of Hormuz makes the outlook for the trajectory of coal demand in 2027 highly uncertain. If LNG flows through the Strait of Hormuz gradually recover towards pre-war levels and natural gas prices settle below 2026 levels, global coal demand is forecast to fall by 0.4% to 8.91 Bt, but if LNG shipments through the Strait remain constrained, global coal demand could increase further.

In 2025, global coal production matched the record high of 9.1 Bt set the previous year. In China – which accounts for more than half of global output – coal production rose by 1.4%, broadly in line with recent years, bringing the cumulative increase since 2020 to more than 1 Bt. In the United States, output rebounded as coal demand strengthened. India and Australia kept output at roughly the same levels as in 2024, while output edged down in Russia and Indonesia.

Global coal production is expected to decline by around 2% in 2026, although it is set to remain above 9 Bt for a third consecutive year. With the gap between production and consumption narrowing, a period of large stockpiling globally has ended for now.

In China, production fell in June and July by around 10% year-on-year, the result of emergency safety inspections triggered by a coal mine explosion in Shanxi province in May, which was the deadliest accident to occur at a Chinese coal mine in years. Nonetheless, we expect a recovery in production volumes through the end of the year, driven by sustained demand and energy security concerns.

In India, coal production is set to increase by more than 1%, as captive and private mines continue to expand production, while growth in output from Coal India, the country’s largest coal producer, is expected to moderate.

In Indonesia, production is set to extend its decline this year after supply outpaced consumption in 2025 and prices fell. However, stronger-than-expected demand for exports has led us to raise our output forecast slightly from our December report.

In the United States, coal production is expected to decline by 3%, while demand is forecast to fall by 7%, supporting stock building and increased exports.

In the Russian Federation (hereafter, “Russia”), coal producers remain under severe financial pressure, with many operating at a loss and facing heavy debt burdens. However, higher prices since March have provided some relief.

As with demand, the outlook for coal production in 2027 will depend on the evolution of the conflict in the Middle East. If LNG flows through the Strait recover, global coal production is expected to increase by around 0.3%, reflecting a rebound in production in China after this year’s decline. The increase could be larger if LNG flows remain constrained, providing support for higher natural gas prices and therefore greater coal use. On the other hand, a rebound in LNG flows would reduce demand for internationally traded coal, weighing on production from the world's major exporters. However, government policies to expand coal production are still expected to support further supply growth in some countries, such as India and Kazakhstan.

As of 2025, demand among major importers like Japan, Korea, Chinese Taipei and the European Union had been in structural decline for several years, reducing their import requirements. Until last year, growth in coal imports by China – the world’s largest importer – had largely offset the declines seen elsewhere. However, when Chinese imports started to ebb in 2025, global coal trade contracted, and rising imports in parts of Southeast Asia were too small to make up the difference.

Gas-to-coal switching in import-dependent markets, notably Japan and Korea, has led to greater demand for traded coal. At the same time, the Shanxi coal mine accident in China has tightened domestic supply, particularly for coking coal. Together, these factors have contributed to higher demand on international markets. As a result, we have revised our forecast for global coal trade upwards since December, especially for thermal coal imports. On the supply side, Indonesia’s lower production targets have unsettled thermal coal markets. Australia’s producers appear best placed to fill this gap, while tighter supply conditions may also provide some relief to struggling exporters in Russia.

In China – and, to a lesser extent, in India – the balance between domestic and imported coal remains highly price sensitive. Together with logistical and quality considerations, this adds uncertainty to trade forecasts for these countries. By contrast, thermal coal trade patterns in Korea, Japan, Chinese Taipei and the European Union are currently easier to forecast. In these regions, imports are expected to resume their earlier declines if the gas-to-coal switching associated with the Hormuz crisis fades. Overall, we expect global coal trade volumes to contract next year, with thermal coal trade falling more sharply than metallurgical coal trade.

Our Coal Market Report published in December 2025 concluded that prices had fallen close to marginal supply costs, indicating the subsequent recovery was a normal market adjustment and not a return to crisis conditions. By February 2026, the Newcastle free-on-board (FOB) thermal coal price had reached USD 115 per tonne, 7% above its December level.

Several factors further supported coal prices in the first half of 2026. Higher natural gas prices, linked to the conflict in the Middle East, made coal more cost-competitive for power generation, supporting coal demand. Export restrictions and regulatory uncertainty in Indonesia added to price pressures, particularly for low-calorific coal. Meanwhile, safety inspections following the mining accident in China in May bolstered prices, particularly for coking coal. Supply disruptions at the Cerrejón mine in Colombia contributed to a tighter Atlantic market.

As a result, FOB Newcastle thermal coal prices averaged USD 139 per tonne in June 2026 before declining slightly to USD 131 per tonne in August. This was up sharply from the depressed levels of late 2025, but still far below the extraordinary highs observed during the 2022 energy crisis, when prices exceeded USD 400 per tonne.