For a commodity supposedly in structural decline, coal has developed an extraordinary capacity to defy the simplicity of the energy-transition narrative. The world consumed more coal in 2025 than ever before, while 2026 is now expected to bring another increase. Yet beneath these record volumes lies a market being steadily reshaped: China is producing and consuming vast quantities while importing less, India is substituting domestic production for seaborne supply, mature economies continue to retreat, and Southeast Asia is emerging as one of the few meaningful pockets of growth. Coal is therefore not disappearing so much as being redistributed – between countries, between fuels and, increasingly, between domestic and international supply chains. In fact, global coal demand increased by just 0.3 percent in 2025 to 8.84 billion tonnes, narrowly exceeding the previous record. The underlying geography, however, tells a considerably more interesting story.
China, responsible for more than 56 percent of global consumption, saw demand broadly unchanged at 4.96 billion tonnes, while India recorded a 1 percent decline to 1.30 billion tonnes. Remarkably, both countries generated less electricity from coal for the first time in five decades. In China, rapidly expanding solar, wind and hydropower generation more than satisfied additional electricity demand during the first half of the year, while industrial coal consumption also weakened. China’s coal market is increasingly less a story of absolute energy scarcity than one of changing utilisation. Small changes in electricity demand, hydropower availability or renewable generation can translate into substantial movements in coal consumption simply because the underlying scale is so vast. Meanwhile, record domestic production and high inventories are reducing China’s reliance on imports, making it both the world’s largest coal consumer and a declining source of seaborne demand. India presents a different version of the same transition. An unusually strong and prolonged monsoon lifted hydropower generation and reduced cooling-related electricity demand, contributing to lower coal-fired generation in 2025. Industrial consumption, however, continued to expand. India’s push to expand domestic production is reducing its reliance on imports, meaning rising energy demand does not necessarily translate into higher seaborne coal demand. Elsewhere, the picture was markedly less uniform. US coal demand jumped by more than 9.5 percent to 410 million tonnes in 2025, helped by stronger electricity demand, higher natural gas prices and policies favouring coal-fired generation. Europe, Japan and Korea moved in the opposite direction, continuing their longer-term retreat from coal. Metallurgical coal was similarly subdued, with global demand broadly unchanged at 1.17 billion tonnes despite weaker steel production. The apparent stability of global demand thus conceals a profound redistribution of its drivers. The mature economies are gradually consuming less, while the emerging world is assuming a larger role. And that distinction becomes even more important when production is considered. Global coal production remained close to its historical peak in 2025 at around 9.1 billion tonnes. China alone produced 4.71 billion tonnes, while India's output remained around 1.1 billion tonnes. Both countries continue to regard domestic coal production as an instrument of energy security, a legacy of the shortages experienced earlier in the decade. But the very success of this supply strategy has created a new problem: inventories have accumulated because production has expanded faster than demand. Indonesia, by contrast, reduced output by more than 5.5 percent from its 2024 record, reflecting weaker prices and softer demand from key Asian buyers. Australia was constrained by weather, industrial disruption and weaker metallurgical-coal conditions, while Colombia suffered from operational problems and rail blockades. Russia remained caught between sanctions and logistical bottlenecks, although discounted cargoes continued to find buyers in Asia. The United States was again the exception, with production increasing.
For 2026, global production is expected to fall by 0.7 percent – its first annual decline in several years. This reflects a gradual correction after years of production growth and inventory accumulation outpaced demand. The more consequential supply adjustment is taking place in Indonesia, where output is expected to decline by around 2.6 percent in 2026. For the seaborne market, Indonesia matters disproportionately because it remains the world's most flexible supplier of thermal coal to Asian buyers. Global coal demand was previously expected to decline in 2026. Instead, it is now forecast to rise by 1.2 percent to 8.94 billion tonnes, largely because the Middle East crisis has disrupted the broader energy equation. The Strait of Hormuz does not sit at the centre of the global coal trade, but it does sit at the centre of the world's gas and energy-security architecture. Higher natural gas prices have encouraged gas-to-coal switching in several power markets. At the same time, El Niño-related heat and weaker hydropower availability are adding another layer of demand. The result is a striking reminder that energy markets cannot be viewed in isolation. A disruption affecting gas can revive coal demand; weather affecting hydropower can increase thermal generation; higher oil prices can improve the economics of coal-to-chemicals; and concerns over energy security can delay the retirement of coal-fired capacity even where the long-term policy direction remains unchanged. If Middle East tensions ease, global coal demand is projected to decline by 0.4 percent in 2027. As gas prices normalise, the temporary incentive to switch towards coal should fade, while expanding renewables, improving grid integration and cheaper LNG once again exert pressure on coal-fired generation. China's demand is expected to edge down but remain close to 5 billion tonnes, while India's consumption should continue to expand alongside electricity and industrial demand. Southeast Asia should remain a growth centre, but this will not be sufficient to compensate for structural declines across Europe, Japan, Korea, and the United States.
Global coal trade fell by around 4 percent in 2025 to 1.48 billion tonnes, largely because Chinese imports declined from 548 million tonnes to approximately 495 million tonnes. Indonesia's thermal-coal exports consequently fell from 557 million tonnes to 517 million tonnes. But the more revealing development is what is happening beneath these headline figures. China's growing reliance on neighbouring Mongolia is replacing part of its traditional seaborne requirement, while India's import substitution is increasingly absorbing domestic production. At the same time, Southeast Asian import demand is expanding. For 2026, global coal trade is expected to edge higher despite a decline in seaborne thermal coal demand to around 1.06 billion tonnes. China’s seaborne thermal imports are projected to fall to approximately 310 million tonnes, while India’s decline continues. Yet Korea, Japan and Southeast Asia provide counterweights, with ASEAN imports rising to around 164 million tonnes. Metallurgical coal offers an even stronger counterpoint: seaborne demand is expected to increase by 16 million tonnes, supported particularly by India and Indonesia. China's growing shift towards Mongolian supply is especially striking, with rail exports of Mongolian coking coal expected to rise by more than 50 percent to around 91 million tonnes. By 2027, however, the underlying direction should reassert itself. Thermal coal trade is expected to resume its decline. Metallurgical coal should prove more resilient, according to the IEA.
For dry bulk shipping, this is less a story about whether coal survives than about where its tonnes come from, where they are consumed and how far they have to travel. The structural decline of Chinese and developed market imports is negative for seaborne demand, particularly when domestic production and short-haul alternatives such as Mongolian rail increasingly displace long-haul cargoes. Yet the redistribution of consumption towards Southeast Asia, the resilience of India's industrial coal requirement and the periodic re-emergence of coal through gas-tocoal switching are creating a more fragmented trading map. Indonesia's supply policies, Australia's export recovery, Russian discounts, South African logistics and the growing importance of Viet Nam all alter the geography of tonne-miles even when global coal volumes barely move.
Data source: Doric