Australia expands coal output as Asian demand lifts exports ahead of COP31

Asian energy security supports coal demand

Australia’s coal industry is expanding capacity as disruption to gas supplies pushes Asian economies toward additional coal purchases. AFP reported that the closure of the Strait of Hormuz has prompted buyers to seek alternatives to gas, with Japan and South Korea using more coal as oil and gas become scarce and expensive. The shift has strengthened the position of Australia, the world’s second-largest coal exporter, in the seaborne market.

The International Energy Agency’s mid-year forecast said global coal demand would rise 1.2% to a record 8.94 billion tonnes in 2026, reversing the decline it had predicted in December. An industry outlook cited by AFP showed Australian thermal coal exports increasing by 8 million tonnes to 213 million tonnes in 2025-2026. The main destinations for coal from New South Wales include South Korea, Japan, China and Taiwan, where it is largely used for electricity generation.

Mine extensions add supply

New South Wales has 37 coal mines. Although the state has banned new mines, it continues to permit extensions to existing operations. In the Mudgee area, three nearby mines are seeking to expand, according to local resident Bev Smiles. Yancoal Australia’s Moolarben operation wants to add another 30 million tonnes of coal, while campaigners say a nature reserve containing 23 threatened species could be affected.

Chinese-backed Yancoal operates eight coal mines across Australia. The company told investors that saleable coal production reached a record 19.8 million tonnes in the first half of 2026, up 4%. New South Wales also approved an expansion of Yancoal’s Hunter Valley mine on the condition that its coal is sold only to countries that have signed the Paris Agreement.

Exports collide with climate diplomacy

Coal from New South Wales generated A$23.4 billion in exports last year. The commercial gains are accompanied by a growing emissions dispute: authorities said a 19-year mine extension approved by the state last week would produce 809 million tonnes of emissions, with 98% arising when the coal is burned overseas. Former New South Wales fire commissioner and climate activist Greg Mullins argued that responsibility for climate damage does not end at national borders.

The debate comes as Australia prepares to serve as president of negotiations for COP31, scheduled for November in Turkey. Its agenda includes the climate risks facing low-lying Pacific islands, faster clean-energy deployment and investment mobilization. The government says it supplied A$3.9 billion, equivalent to US$2.7 billion, in climate finance from 2020 to 2025. It has also set a 2035 target to cut emissions by 62-70% from 2005 levels, while one-third of Australian households already have rooftop solar.

Climate Change and Energy Minister Chris Bowen told AFP that a short-term increase in coal demand caused by an international supply shock should not be interpreted as a reversal of the energy transition. For miners and traders, however, current gas disruption is supporting volumes and mine extensions. Longer-term demand will depend heavily on Asian energy policy, the speed of renewable investment and decisions on when coal-fired power plants are retired or decarbonized.