On June 2, 2026, the World Meteorological Organization (WMO) released its latest report, stating that the probability of an El Niño event occurring between June and August 2026 is as high as 80%, while the likelihood of the phenomenon persisting at least through November is close to or above 90%. The report also forecasts above-average temperatures across most regions of the world during the June–August period.
On June 11, the U.S. National Oceanic and Atmospheric Administration (NOAA) further confirmed that the tropical Pacific had entered El Niño conditions and issued an El Niño advisory. Its latest outlook suggests that the event could strengthen into a moderate or even strong El Niño by this autumn.
Since March, discussions surrounding El Niño have intensified and gradually become one of the key factors supporting bullish sentiment in the international coal market. If El Niño develops as expected, it could have far-reaching implications for both the supply and demand sides of the global coal market.
Rising Summer Temperatures Could Boost Global Power Demand
El Niño is typically associated with the release of large amounts of heat from the ocean into the atmosphere, which raises global average temperatures. If the current El Niño continues to develop, the probability of extreme summer heat across much of the world will increase significantly, driving higher electricity consumption.
From a global perspective, the expectation of hotter weather linked to El Niño is generally supportive of coal demand and could provide upward pressure on coal prices.
China: A Diverging Coal Market Under the “Flood South, Drought North” Pattern
On the demand side, higher temperatures are expected to significantly boost summer electricity consumption. At the end of May, China's National Development and Reform Commission (NDRC) stated that the country's peak power load during the summer of 2026 could reach 1.6 billion kW, around 90 million kW higher than last year.
Recently, the maximum load of the China Southern Power Grid reached 275 million kW, up 18.58 million kW or approximately 7% from last year's peak. Notably, the new record was set 45 days earlier than in 2025. Meanwhile, although navigation through the Strait of Hormuz has resumed, global oil and gas supply chains still require time to recover. Against this backdrop, rising power demand caused by hot weather is expected to provide strong support for coal consumption.
El Niño's impact on China's coal market could be multifaceted. According to WMO forecasts, China may experience a "flood south, drought north" weather pattern this summer. Increased rainfall in southern China could affect renewable energy output, while changes in hydropower generation are likely to become a key variable influencing coal demand.
The 2026 flood season arrived significantly earlier than usual, bringing abundant water inflows to southern China. On May 29, inflow to the Three Gorges Reservoir reached 24,000 cubic meters per second, the highest level ever recorded for late May since reservoir operations began in 2003. Outflow reached 28,900 cubic meters per second on the same day, up 95.61% year on year.
If rainfall remains above normal, hydropower generation could increase further and partially replace coal-fired power generation, offsetting some of the additional coal demand created by higher temperatures. Moreover, severe flooding in certain regions could temporarily disrupt industrial and commercial activities, suppressing electricity consumption.
On the supply side, persistent rainfall in 2025 disrupted mining operations and transportation in several major coal-producing regions. If northern China experiences drier-than-normal conditions this year, pressure on coal production and logistics could ease, improving domestic coal supply.
Indonesia: Logistics Risks May Become a Key Support for International Coal Prices
As the world's largest seaborne thermal coal exporter, Indonesia relies heavily on inland waterways for coal transportation.
Iwa Garniwa, a professor at the Faculty of Engineering of the University of Indonesia, recently warned that El Niño could significantly lower water levels in the Mahakam and Barito rivers in Kalimantan during the 2026 dry season. These rivers are critical transportation routes for Indonesia's coal industry.
Historical examples highlight the risks. In August 2019, the Mahakam River experienced 14 shallow points and sediment accumulations, forcing large coal barges to suspend operations for three days and causing severe port congestion. In October 2023, water levels in the Barito River fell to extremely low levels, prompting some coal producers to declare force majeure.
If severe drought conditions reoccur this year, transportation efficiency could deteriorate or even be disrupted, reducing Indonesian coal exports. This would tighten global seaborne thermal coal supply and provide significant support to international coal prices.
India: Hydropower Constraints and Declining Inventories Support Coal Demand
India remains one of the fastest-growing coal-consuming markets in the world, making El Niño's impact particularly important.
Recent reports indicate that several parts of India have already shown clear signs of drought. According to media reports, rainfall during the first ten days of June was 27% below the long-term average, while precipitation in central and northern India is expected to remain below normal over the next two weeks.
Reduced rainfall directly affects hydropower generation. According to CCTD monitoring data, India's hydropower output has fallen by 11.4% year on year since the beginning of June, creating a generation shortfall that must be compensated by thermal power plants.
At the same time, domestic coal supply growth has been less than satisfactory. Data from India's Ministry of Coal show that coal production reached 78.13 million tonnes in May, up 5.13% from April but down 9.51% year on year. The decline may be partly attributable to higher operating costs resulting from rising fuel prices.
Although Indian authorities continue to describe national coal inventories as adequate, data from the Central Electricity Authority indicate that power plant coal stocks stood at 47.42 million tonnes as of June 10, equivalent to 15.3 days of consumption. Among them, 25 coal-fired power plants were operating at critical inventory levels.
Import dependence has also increased. According to the Indonesian Coal Mining Association, coal imports through India's major state-owned ports reached 18.69 million tonnes in May, up 10.24% year on year and 8.43% month on month.
However, elevated international coal prices, exchange-rate volatility, and broader economic pressures continue to limit import demand. Despite inventory gaps, the sustainability of India's coal imports remains uncertain. Market feedback suggests that spot purchasing activity remains cautious, with no significant increase in thermal coal imports so far.
Europe: Heatwaves and Low Gas Inventories Heighten Market Concerns
Europe is also being affected by El Niño-related weather expectations.
According to The Guardian, parts of the United Kingdom, France and Germany experienced temperatures 10–15°C above seasonal averages during a late-May heatwave. Both the UK and France recorded their warmest May on record.
Meanwhile, Europe's natural gas inventories remain below last year's levels. Data from the Aggregate Gas Storage Inventory (AGSI) show that European gas storage facilities were 43.36% full as of June 12, while actual inventory volumes were approximately 17% lower than a year earlier.
If hot weather persists, increased air-conditioning demand could further boost gas consumption. A prolonged summer heatwave would likely intensify gas replenishment pressure, support higher natural gas prices, and enhance coal's competitiveness as an alternative fuel in certain markets.
Conclusion
Overall, the current El Niño event is likely to influence both the demand and supply sides of the global coal market.
On the demand side, above-average temperatures worldwide are expected to increase cooling demand and drive higher electricity consumption in major economies such as China, India and Europe. On the supply side, drought-related disruptions to Indonesia's river transportation network could constrain coal exports and tighten global seaborne thermal coal supply.
The impact will vary by region. In China, abundant rainfall in the south could boost hydropower generation and partially replace coal-fired generation. In India, hydropower shortages and declining inventories support coal demand, but imports remain constrained by high prices. In Europe, the combined effects of low natural gas inventories and elevated summer temperatures are likely to keep energy markets highly sensitive to weather developments.
As a result, El Niño may emerge as one of the most important factors shaping the global coal market during the second half of 2026.
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