September 20, 2026 - Global coal markets are heading into 2027 with an unusual combination of resilience, uncertainty and structural change, according to the International Energy Agency’s latest Coal Mid-Year Update 2026.

While geopolitical tensions and higher natural gas prices have given coal demand and trade an unexpected boost in 2026, the IEA expects those gains to prove temporary, with international coal trade set to resume its decline next year.

The report paints a picture of a market still shaped by energy security concerns and disrupted fuel markets, particularly following the conflict in the Middle East. Yet the longer-term trajectory remains downward for seaborne thermal coal, especially as China reduces import dependence and mature markets continue their transition away from coal-fired power generation.

The IEA notes that 2025 marked a significant turning point. “Global coal trade retreated in 2025 after hitting an all-time high the previous year, with total imports falling by around 4% to 1.48 billion tonnes (Bt),” the report states. The decline came primarily from China, where imports fell from a record 548 million tonnes in 2024 to roughly 495 million tonnes in 2025 as strong domestic production, softer demand and high inventories reduced the need for imported coal.

Despite that setback, coal trade has received an unexpected reprieve in 2026. According to the IEA, “we now expect global coal trade volumes to edge higher in 2026, contrary to our December forecast of a contraction, as a result of the ongoing crisis in the Middle East”. Higher natural gas prices have encouraged gas-to-coal switching in countries such as Japan and South Korea, while supply disruptions and strong Chinese demand for Mongolian coal have tightened international markets.

The result is a year in which trade flows have been reshaped rather than fundamentally expanded.

China’s seaborne thermal coal imports are still expected to decline, falling to approximately 310 million tonnes in 2026 from 325 million tonnes in 2025. India’s imports are also forecast to slip, reflecting government efforts to replace imported coal with domestic production. Meanwhile, Southeast Asia remains the standout growth region, led by Vietnam, where imports are expected to rise from 55 million tonnes to 62 million tonnes as power demand outpaces domestic supply.

Australia appears among the key beneficiaries of shifting trade patterns. The IEA says Australian producers are well positioned to compensate for lower Indonesian supply, while Australian exports are forecast to increase in both thermal and metallurgical coal markets. Russia, despite sanctions and logistics constraints, is also expected to benefit from tighter supply conditions, with exports remaining important to Asian buyers.

Downwards trend for trade

For trades, however, the more important story is what comes next. The agency’s outlook for 2027 is dominated by the potential easing of Middle East tensions and the normalisation of global LNG markets. In the report’s words, “trade volumes are likely to contract in 2027 once gas-to-coal switching eases”.

The forecast assumes LNG flows through the Strait of Hormuz gradually recover and natural gas prices retreat from current elevated levels. Under those circumstances, utilities that switched to coal for economic reasons would increasingly return to gas. As a result, thermal coal demand in several major importing regions would weaken.

The IEA is explicit about the direction of travel. “Overall, we expect global coal trade volumes to contract next year, with thermal coal trade falling more sharply than metallurgical coal trade.”

The decline will be led by China. According to the report, “the main driver is China, where demand for imported thermal coal remains weak”. At the same time, structural declines continue across the European Union, Japan, South Korea and Chinese Taipei.

What makes this especially significant is China’s outsized role in international coal trade. For more than a decade, Chinese imports helped absorb surplus supply and provided support for exporters ranging from Indonesia and Australia to Russia and South Africa.

With China’s import appetite now moderating, the market must increasingly rely on smaller growth centres such as Southeast Asia.

The IEA warns that growth in countries including Vietnam and the Philippines is “too small to outweigh falling imports in China and other mature import markets.”

Exporters are expected to feel the impact unevenly. Indonesia is projected to account for the largest fall in thermal coal shipments in 2027, reflecting weaker demand from major Asian customers and rising domestic consumption. Russian exports are also forecast to decline, although the IEA acknowledges continued uncertainty stemming from sanctions, transport constraints and government support measures. Colombian thermal coal exports are expected to weaken further, while Australian and South African shipments remain broadly stable.

While thermal coal faces renewed pressure, metallurgical coal offers a more resilient outlook.

The IEA predicts that metallurgical coal trade will remain “broadly stable in 2027”. Robust Indian steel production is expected to offset lower demand in China and other developed economies. Australia, already the world’s leading exporter of metallurgical coal, is likely to capture much of this demand growth, with the US also benefiting where pricing remains supportive.

Mongolia’s presence

One of the most notable shifts identified by the report is the growing importance of Mongolia in China’s supply chain. The IEA highlights China’s “accelerating shift away from seaborne supply and towards Mongolia”, with Mongolian coking coal exports to China expected to exceed 90 million tonnes in 2026. This emerging overland trade route is reshaping regional coal flows and reducing China’s reliance on traditional maritime suppliers.

For the broader demand picture, the IEA forecasts that if Middle East tensions ease, global coal demand will decline by 0.4% in 2027 to 8.91 billion tonnes.

Although this would still leave demand above 2025 levels, it would mark the beginning of another downward phase for international markets. “Some of the factors that supported increased coal use in 2026 are projected to fade,” the report notes, citing lower gas prices, expanding renewable generation and cheaper LNG.

For the coal trade, 2027 is therefore shaping up as a year of adjustment rather than growth. The extraordinary market support provided by gas shortages and geopolitical disruption appears unlikely to endure. Instead, exporters face a future increasingly defined by China’s changing import strategy, Southeast Asia’s limited growth potential and the gradual erosion of thermal coal demand across mature economies.