Global coal demand is expected to rise to a record level this year as sharp increases in natural gas prices, driven by disruption in the Middle East, prompt countries to turn to coal for power generation, the International Energy Agency (IEA) has said.
In its Coal Mid-Year Update 2026, the IEA said disruptions linked to the conflict in the Middle East had pushed up energy prices and encouraged greater coal use in countries with gas-fired power plants and spare coal-fired capacity.
Although virtually no coal shipments pass through the Strait of Hormuz, the disruption has affected coal markets because LNG shipments through the strategic waterway have fallen sharply, driving natural gas prices higher.
The resulting shift from gas to coal has contributed to stronger-than-expected coal consumption in Europe, Japan, South Korea, China and other markets, according to the IEA.
China has also increased coal consumption for the production of chemical products amid high oil prices.
The IEA said expectations of a particularly strong El Niño weather pattern this year could further boost coal demand in major Asian markets, including India and Vietnam, as higher temperatures increase demand for cooling while lower hydropower generation increases reliance on coal.
Global coal demand, which had previously been expected to decline slightly this year, is now forecast to increase by 1.2% in 2026 to 8.94 billion tonnes, a record high.
Hormuz key to 2027 outlook
The outlook for 2027 remains highly uncertain and will depend heavily on developments in the Strait of Hormuz, the IEA said.
If LNG flows through the strait recover and natural gas prices fall towards pre-conflict levels, global coal demand could decline next year.
However, if the waterway remains largely closed to LNG shipments, coal consumption could increase further as countries seek alternatives to gas.
Global coal production is expected to fall in 2026 after reaching a record high in 2025, although output is forecast to remain above 9 billion tonnes for a third consecutive year.
The decline is largely linked to lower production in China, the world’s biggest coal producer, following safety inspections triggered by a major mine accident in May.
The inspections have resulted in a significant reduction in Chinese coal output, narrowing the gap between global production and consumption. As a result, the large build-up of coal inventories accumulated in recent years is expected to ease.
Global coal production is forecast to recover slightly in 2027 as Chinese output rebounds.
Coal prices under pressure
The IEA also expects coal demand in international markets to be higher than previously forecast, partly because of lower domestic production in China and increased demand from import-dependent countries such as Japan and South Korea.
Coal consumption in both countries has risen as natural gas prices have increased, adding to pressure on international coal supplies.
Together with tighter supply, stronger demand is contributing to higher coal prices globally, the IEA said.
The agency’s latest outlook highlights the continuing sensitivity of global energy markets to disruptions in gas supplies, with developments around the Strait of Hormuz likely to play a significant role in determining whether the recent shift from gas to coal persists into 2027.