Global coal demand is now forecast to rise by 1.2% in 2026 to a record 8.94 billion tonnes, after higher natural-gas prices pushed some power systems back toward coal, the International Energy Agency says.
The forecast in the IEA’s Coal Mid-Year Update reverses its earlier expectation of a slight decline. The agency ties the shift to a sharp fall in liquefied natural gas shipments through the Strait of Hormuz during the Middle East conflict, which has lifted gas prices even though the strait is not a major coal route.
Coal and gas often compete in power markets. When gas becomes more expensive, utilities with coal-fired capacity can switch generation if their equipment, fuel supplies and local rules allow it. The IEA says that switch has raised expected coal use in Europe, Japan, Korea, China and other markets.
Gas disruption is reaching coal markets indirectly
The IEA’s argument is about the cost of competing fuels, not a disruption to coal shipping itself. Lower LNG flows have tightened gas supply, and the price response has favored coal where power fleets still have spare coal capacity.
China has also increased coal use for chemical production as oil prices rose, the agency says. A particularly strong El Niño expected this year may add to demand in parts of Asia, including India and Viet Nam, where hotter weather can raise cooling demand and lower hydropower output.
Those forces sit alongside a slower supply side. Global coal production is expected to fall in 2026 but remain above 9 billion tonnes for a third consecutive year, the IEA says. The agency links much of the decline to lower Chinese output after safety inspections following a major mine accident in May.
Inventories and prices are under pressure
When use grows while output falls, stockpiles tend to absorb some of the difference. The IEA expects the large global build-up of coal inventories from recent years to ease in 2026.
International coal demand is also running ahead of earlier expectations, according to the update. Lower domestic output in China, higher demand from import-dependent Japan and Korea, and tighter supply are contributing to higher coal prices.
The 2027 outlook depends on LNG flows
The agency does not treat the 2026 forecast as a settled direction for the coal market. If LNG traffic through the Strait of Hormuz recovers and gas prices fall, global coal demand could decline in 2027. A prolonged disruption could push it higher again.
The episode shows how a gas-supply shock can alter electricity-fuel choices far beyond the immediate region. It also leaves governments and power companies facing a difficult trade-off: a fuel that can ease a short-term supply squeeze can also raise emissions and complicate longer-term energy plans.
