Global Thermal Coal Demand Expected to Decline as LNG Markets Stabilise

Australia's Department of Industry, Science and Resources said in its September 2026 Resources and Energy Quarterly, released in early October, that Middle East conflict and extreme heat reshaped global thermal coal markets in 2026. Disruptions to LNG supplies through the Strait of Hormuz drove up gas prices, prompting Japan, South Korea and Taiwan to increase coal-fired generation, while heatwaves boosted electricity demand.

However, as supply disruptions ease and renewable energy capacity expands, the International Energy Agency (IEA) expects global coal-fired power generation to rise 1.4% in 2026 before falling 0.7% in 2027. Newcastle 6,000 kcal/kg thermal coal prices averaged around US$135/t in the third quarter, compared with US$116/t before the conflict, but are expected to return to pre-conflict levels by mid-2027.

Import trends vary across major markets. China's thermal coal imports rebounded in June and July following domestic supply constraints and stronger summer demand, but imports are expected to decline by around 3% annually through 2030–31 as renewable energy expands and domestic production remains strong. India's imports fell 11% in the first half of 2026 despite higher coal-fired generation, supported by ample inventories and increased domestic output. Japan and South Korea also increased coal consumption amid high LNG prices, although inventories, nuclear restarts, renewable growth and decarbonisation policies are expected to limit future import demand.

Export trends remain mixed. Indonesia's thermal coal exports fell 5% year on year in the first half of 2026 and are forecast to decline from 517 million tonnes in 2025 to 465 million tonnes in 2031. Australian exports rose 14% year on year in the second quarter on stronger Northeast Asian demand, but are projected to gradually decrease from 209 million tonnes in FY2026–27 to 199 million tonnes in FY2030–31. South African exports increased 7% in the first half, while Colombian exports rose 9%, although logistical constraints are expected to weigh on Colombia's longer-term shipments.

Overall, the report expects global thermal coal supply and demand to gradually contract over the longer term, with the market remaining broadly balanced as renewable energy expansion reduces reliance on coal-fired power.