Today Markets Analysis: Coal prices held above $145 per tonne in mid-September, remaining close to their highest levels in three months as disruptions across global energy markets encouraged a renewed shift toward coal-fired power generation.

The latest move highlights an important change in the global energy balance. While the Middle East is not a major coal-producing region and relatively little coal passes through the Strait of Hormuz, disruptions to oil, natural gas and LNG supplies are making coal increasingly attractive as an alternative fuel for power generation.

The International Energy Agency has consequently revised its outlook and now expects global coal demand to increase 1.2% to a record 8.94 billion tonnes this year, reversing its previous forecast for a modest decline.

LNG Disruptions Push Utilities Back Toward Coal

The primary driver behind the stronger coal outlook is the disruption to global gas markets.

The Middle East conflict has pushed oil and natural gas prices higher while LNG shipments have fallen sharply. For utilities across Europe and Asia, this changes the relative economics of power generation.

Where coal-fired generation remains available, higher gas prices can make coal more competitive even when environmental and emissions costs are considered.

This creates an important energy-market transmission mechanism:

LNG disruption → higher gas prices → coal becomes more competitive → coal-fired generation increases → coal demand rises.

The development demonstrates that disruptions in one part of the energy system can quickly create additional demand for another fuel.

IEA Raises Global Coal Demand Forecast

The IEA now expects global coal consumption to reach a record 8.94 billion tonnes, representing growth of approximately 1.2% this year.

That revision is significant because the agency had previously anticipated a slight decline in global coal demand.

The change suggests that the current energy shock is strong enough to temporarily reverse the longer-term trend toward lower coal consumption.

Europe and Asia are particularly important to this equation because both regions have been exposed to disruptions in LNG availability and higher imported energy costs.

China Adds Another Source of Coal Demand

China is providing an additional source of support.

Higher oil prices have encouraged increased coal consumption in China’s chemical industry, adding industrial demand alongside power-generation requirements.

China remains critical to the global coal market because of the scale of its electricity system and industrial base.

At the same time, developments within China’s domestic coal industry could tighten the physical market.

Chinese Mine Inspections Threaten Production

The IEA expects global coal output to decline in 2026, with developments in China playing an important role.

Following a major mine accident in May, Chinese authorities introduced extensive safety inspections. The inspections have significantly reduced domestic coal production.

That creates an unusual combination for the market.

Demand is being supported by higher energy prices and substitution away from gas, while production is facing additional restrictions in one of the world’s largest coal markets.

If reduced Chinese output persists, international coal prices could remain supported even if the Middle East energy situation begins to stabilise.

Coal Market: Bullish and Bearish Forces

Coal’s Role in the Broader Energy Market

Coal is increasingly becoming the shock absorber of the global electricity system.

When natural gas becomes expensive or unavailable, countries with existing coal-fired capacity can increase coal consumption to protect electricity supply.

This does not necessarily represent a reversal of the long-term energy transition. Instead, it demonstrates how quickly energy security can override longer-term decarbonisation objectives when supply becomes constrained.

The current environment therefore creates a potentially important distinction between structural coal demand and cyclical coal demand.

Structural demand may continue to face pressure from renewable energy investment, emissions policy and the gradual expansion of cleaner generation.

Cyclical demand, however, can rise sharply when gas and LNG become expensive or unavailable.

What Traders Are Watching Next

The key question for coal markets is whether the current energy disruptions persist long enough to create a sustained increase in coal consumption.

Traders will be watching:

• Global LNG shipment volumes
• European and Asian natural gas prices
• Middle East energy infrastructure
• Chinese domestic coal production
• Chinese mine-safety inspections
• Power-sector coal demand
• Asian coal imports
• Oil and gas substitution economics
• Further IEA revisions to global demand forecasts

Today Markets View

Coal’s move above $145 per tonne is becoming less about coal itself and more about the broader global energy system.

The important development is the interaction between oil, natural gas, LNG and coal. Disruptions to LNG supplies are making coal more economically attractive, while restrictions on Chinese production are simultaneously limiting supply.

That combination has pushed the IEA to abandon its previous expectation of falling global coal demand and instead forecast another record year of consumption.

Louis Roche, Analyst at Today Markets, said:

“Coal is benefiting from a classic energy-substitution effect. When LNG becomes more expensive or less available, utilities have to look for alternatives, and coal remains an important part of the generation mix across Asia and parts of Europe. The more interesting question is whether this is a temporary response to the current energy shock or whether constrained Chinese production and persistent LNG risks create a tighter coal market for longer.”

Bottom Line

Coal is holding above $145 per tonne, close to a three-month high, as the global energy crisis reshapes fuel demand.

The IEA now expects global coal consumption to reach a record 8.94 billion tonnes, up 1.2%, while global production is expected to decline in 2026.

For traders, the key relationship is increasingly clear:

Higher oil and gas prices + disrupted LNG supplies + constrained Chinese coal production = stronger support for coal prices.

If LNG flows recover and energy markets stabilise, some of that demand could reverse. Until then, coal remains an important beneficiary of the global energy-security trade.

Analysis by Louis Roche, Analyst, Today Markets