11 September 2026, 09:50 UTC

IEA raises 2026 coal outlook: global demand to hit a record 8.94 billion tonnes

The International Energy Agency has upgraded its 2026 coal forecast, expecting demand to rise 1.2% to a record 8.94 billion tonnes. Higher gas prices, restricted LNG flows through the Strait of Hormuz and a strong El Nino are driving gas-to-coal switching in Japan, South Korea, China and Europe. Newcastle thermal coal averaged $139 per tonne in June before easing to about $131 in August.

The International Energy Agency has raised its outlook for the global coal market in 2026, projecting that demand will grow 1.2% to a record 8.94 billion tonnes. The upgrade is contained in the agency's Coal Mid-Year Update 2026 and was reported by the Polish industry portal wnp.pl and the business outlet money.pl.

According to the IEA, the revision against its earlier projections is driven above all by the conflict in the Middle East, higher natural gas prices and weather factors. money.pl links the disruption on energy markets to the war waged against Iran by the United States and Israel in February.

Gas-to-coal switching returns

Restrictions on LNG flows through the Strait of Hormuz pushed gas prices higher and improved the economics of coal-fired generation, the IEA said. The resulting gas-to-coal switching is visible in Japan, South Korea, China and Europe, where some power producers are running coal units harder at the expense of gas-fired capacity. The shift reflects relative fuel costs rather than any change in energy policy.

A strong El Nino adds a second layer of support. The agency expects it to lift electricity demand for cooling and to curb hydropower output in Asian countries, particularly India and Vietnam, where hydro normally displaces thermal generation during the wet season.

Output falls, trade expands

Despite record consumption, global coal production is set to decline by about 2% in 2026. Even so, the IEA expects output to remain above 9 billion tonnes, the third consecutive year that global supply has held above that mark.

Trade is moving the other way. Higher gas prices have lifted demand for imported coal in countries that depend on foreign supply, especially Japan and South Korea. In China, reduced domestic availability following a mining accident increased purchases of coking coal on the international market. The agency has therefore raised its forecast for global coal trade, with the strongest revision in the thermal segment.

Global demand in 2026: up 1.2% to 8.94 billion tonnes
Global production in 2026: down about 2%, still above 9 billion tonnes
Import demand: rising in Japan and South Korea; Chinese coking coal buying up after a mining accident
Trade forecast: raised, led by thermal coal

Newcastle rebounds to $139

The market went through a clear price recovery in 2026. The Newcastle FOB thermal coal benchmark climbed to $115 per tonne as early as February, averaged $139 per tonne in June and traded at around $131 per tonne in August.

The IEA points to several supporting factors beyond costlier natural gas: export restrictions and regulatory uncertainty in Indonesia, safety inspections at Chinese mines and production disruptions at the Cerrejon mine in Colombia. Even after the rally, prices remain far below the peaks of the 2022 energy crisis, when the benchmark exceeded $400 per tonne.

2027 depends on Hormuz

The agency describes the outlook for 2027 as exceptionally uncertain and frames it around a single variable: LNG shipping through the Strait of Hormuz.

If traffic returns to normal levels, the IEA expects global coal demand to fall 0.4% to 8.91 billion tonnes, with international trade contracting again. If the gas supply constraints persist, higher gas prices could sustain the increase in coal use and push demand up further. Both scenarios leave the market's direction dependent on a shipping lane rather than on coal fundamentals.

Expert commentary

“Gas did this, not coal policy. LNG flows through Hormuz were squeezed, gas prices jumped, and coal units in Japan, South Korea, China and Europe became the cheaper option again. That is how you get 8.94 billion tonnes and a 1.2% increase in a market everyone had written off. Newcastle went from $115 per tonne in February to an average of $139 in June, then eased to about $131 in August. The August number tells you more than the June peak: the risk premium is already draining out.

Production is the part worth pausing on. Output falls roughly 2% and still clears 9 billion tonnes for the third year running, above demand of 8.94 billion. This is not a shortage market. Prices are being set by gas, by Indonesia's export rules, by Chinese safety inspections and by the Cerrejon outage in Colombia. That is supply-side noise, not a structural deficit. At $400 per tonne in 2022 miners were reopening idled capacity; at $131 nobody is financing a new thermal mine.

For importers the exposure is asymmetric. Japanese and Korean utilities are contracting tonnes they may not need in 2027, because the IEA's own alternative case has demand dropping 0.4% to 8.91 billion tonnes the moment Hormuz traffic normalises. Chinese coking coal buying is a separate story driven by one mining accident, and it closes as soon as domestic output recovers. Treat 2026 as a gas-price trade with coal as the instrument, and price the 2027 tail accordingly.”

Priya Raghavan

Energy Markets Analyst