Coal demand forecast raised to 8.94 billion tonnes on Hormuz LNG disruption

IEA lifts 2026 coal demand forecast to 8.94 billion tonnes#

Global coal demand is now expected to rise 1.2 percent in 2026 to 8.94 billion tonnes, the International Energy Agency said in its Coal Mid-Year Update 2026 published Thursday. The revision reverses the agency's earlier forecast for a slight year-on-year decline and brings projected consumption to a record high. The change reflects disruptions at the Strait of Hormuz that have tightened liquefied natural gas supply and raised gas prices, prompting utilities in multiple markets to increase coal-fired generation. The IEA attributed the upward revision to the Middle East crisis and an unusually strong El Niño weather pattern affecting cooling demand and hydropower output.

LNG supply tightness shifts power generation to coal#

Although coal shipments do not pass through the Strait of Hormuz, restrictions on LNG flows through the waterway have reduced gas availability and lifted prices, improving coal's competitiveness for electricity generation. The IEA said the supply dislocation has prompted China, India, Japan, South Korea and Europe to rely more heavily on coal-fired capacity. The agency noted that the shift underscores coal's continuing role as a fallback fuel when other energy supplies are disrupted. Gas prices rose as LNG shipments out of Hormuz slumped materially following the onset of conflict in the region more than six months ago.

China and India account for majority of 2026 increase#

Coal demand in China is forecast to rise 1 percent in 2026 to 5 billion tonnes, while India is expected to see a 4.2 percent increase to 1.353 billion tonnes, reversing last year's temporary slight drop, the IEA said. South Korea's coal demand is projected to climb 6 percent. Japan and the United States are expected to see declines of 1 percent and 7 percent respectively. The two largest consumers, China and India, together account for the bulk of the global increase. The IEA said coal production is expected to decline this year even as consumption rises, tightening the market and supporting prices.

2027 outlook tied to duration of Middle East disruption#

If tensions ease and LNG shipments resume, allowing gas prices to decline, global coal demand is expected to fall 0.4 percent in 2027 to 8.91 billion tonnes, the IEA said. Prolonged disruption could instead push coal use to further record highs. Thermal coal prices rose in the first half of the year, at times reaching 150 dollars per tonne. The agency said the Middle East crisis is expected to boost global coal trade and help stabilise the market, tying the outlook increasingly to geopolitical developments. China's coal output is forecast to fall following safety inspections after a major mine accident earlier this year, the IEA added.