Global coal demand is now forecast to rise 1.2 per cent in 2026 to a record 8.94 billion tonnes, as disruptions from the Middle East conflict push up natural gas prices and encourage greater coal-fired power generation, according to the International Energy Agency’s (IEA) Coal Mid-Year Update 2026.

The conflict has affected coal markets despite virtually no coal shipments passing through the Strait of Hormuz.

The region is not a major coal producer or consumer, but the sharp decline in liquefied natural gas (LNG) shipments through the strategic waterway has driven natural gas prices higher.

 As a result, countries with gas-fired power fleets and available coal capacity have increasingly turned to coal for electricity generation.

The shift has contributed to stronger-than-expected coal consumption across several major markets, including Europe, Japan, South Korea and China.

Higher oil prices have also encouraged China to increase coal use in chemical production.

Weather conditions are expected to provide an additional boost to coal demand in Asia.

The IEA said expectations for a particularly strong El Niño pattern could increase cooling requirements while reducing hydropower generation in major coal-consuming countries such as India and Viet Nam.

The latest forecast represents a significant change from the IEA’s previous outlook, which had anticipated a slight year-on-year decline in global coal demand in 2026.

Demand is now expected to reach a new record, despite efforts in many economies to reduce coal consumption and emissions.

The outlook for 2027 remains highly uncertain and will depend heavily on developments around the Strait of Hormuz.

If LNG flows through the waterway recover and natural gas prices return towards pre-conflict levels, coal demand could fall next year.

However, a prolonged disruption to LNG shipments could push coal consumption even higher.

Global coal production is expected to decline in 2026 after reaching a record in 2025, although output will remain above 9 billion tonnes for a third consecutive year.

The decline is largely linked to China, the world’s largest coal producer, where safety inspections following a major mine accident in May have significantly reduced production.

With the gap between global coal production and consumption narrowing, the large inventories accumulated in recent years are expected to ease.

Production is forecast to recover slightly in 2027 as Chinese output rebounds.

International coal markets are also facing tighter conditions. Lower domestic production in China, combined with stronger demand from import-dependent markets such as Japan and South Korea, is increasing pressure on global supplies.

Alongside higher consumption and constrained production, these factors are contributing to higher coal prices worldwide. -OGN/TradeArabia News Service