Global coal demand is peaking – but how long will the sector’s good fortune last?

Despite a global push to phase out consumption, Australia’s coal sector generated 13 percent of Australia’s exports (A$86 billion) last year, with demand from the world’s largest importer, China, not showing any immediate signs of a downturn.

However, with climate action stepping up, globally, how long is this resilience expected to last? And what are the sector’s short to medium term prospects?

Ahead of the Longwall Conference 2025, we spoke with Rory Simington, Principal Analyst of Asia Pacific Thermal Coal Research, at Wood Mackenzie, to find out.

Fuelling demand growth

At around 1.4 billion tonnes, 2024 year was a big year for the global coal market, and Mr Simington believes demand for the commodity is still increasing.

“It’s partially a reflection of the growing power sector,” he said. “The power sector consumed around 5.3 billion tonnes last year, up 1.7 percent from the year before. And it looks like 2025 will be another record year.”

Underpinning this are the lingering concerns of various countries around their ability to source baseload power, domestically, Simington highlighted.
“For many countries, getting off coal has proven difficult – even for those with a clear exit plan.

“For countries like China, this has prompted record demand for thermal coal, with 365 million tonnes imported last year. This represents a twelve percent year-on-year increase, and more than one third of the global market.”

Fuelling China’s demand for thermal coal is a rise in the average national temperature and, in turn, a growing reliance on air conditioning.

“It was the warmest year in China since they began compiling complete records in 1961. So there was quite a lot of electricity demand for cooling.
That, coupled with high domestic prices, helped to supercharge imports in in 2024,” Simington said.

A downturn could be imminent

However, China’s appetite for thermal coal may be short lived, with the country upping its renewable capacity to the tune of 1.3 gigawatts last year – a volume it is seeking to double by 2029.

With such a notable increase, the descent in thermal coal demand could be sharp once it has begun, Simington warned.

“After 2028 we’re probably going to be looking at an annual decline in China’s overall demand of around 100 million tonnes every year,” he said.

However, Simington concedes the situation is not black and white, with the 300 gigawatts of extra renewable capacity China added last year not due to reach the grid until later in the decade.

As insurance, China also has a 300 gigawatt pipeline of coal plants that will not reach peak capacity until 2030.

“It’s a nuanced situation. There is no doubt that coal will be phased out – but it’s going a bit slower than expected.

“China has a recent history of blackouts, so it is easy to understand why they are not burning their bridges to coal, when it’s their only available backup option.

“Other countries have more gas capacity, or gas fired electricity generation capacity to fall back on. China doesn’t have much of that, because all their gas is imported, and they don’t want to rely on imports.”

Adding further nuance to the picture is a protracted appetite for metallurgical coal – with the world’s seaborne market looking bright out to 2050.

“Overall demand for met coal will go down, but the seaborne demand is going to rise steadily for another two and a half decades, we think.”
Could China change tack?

Mr Simington said there could also be a shake-up in how China’s manages its energy transition, with analysts generally predicting one of two scenarios.

“Scenario one is that China will continue with the current market-driven approach. It will continue to procure from Australia, because its domestic producers are higher cost in general terms.

“This will mean more rationalisation of coal production in China, compared to the seaborne market, and the seaborne imports would likely continue on much as they are at the moment.

“Scenario two is where China uses one of a variety of mechanisms to restrict imports, so domestic producers can capture more of the domestic market and support employment. This would obviously have a huge impact on the seaborne thermal coal market, with China one third of global demand last year.”

US is not a concern

The instatement of President Trump in the United States – and his bid to revive US coal – is unlikely to have much influence on the market, Simington said.

“There is so much cheap LNG and natural gas available in the US, and the coal plants are ageing. I think there’ll be some coal plant retirements extended, but really no one is thinking about building new coal-fired power in the US. There are no indications.”

Trump’s ongoing tariff threats would also likely be inconsequential for Australian coal, Simington said.

“The actual impact of the tariff war directly on the coal market is going to be very limited. More of a concern is the potential for economic growth in China and the US to slow, but it would likely be an incremental impact, if any.”

Can Australia meet demand?

Assuming the seaborne market momentum continues, Mr Simington warns that Australia’s ability to service it is not a guarantee, with growing concerns that existing coal mines do not have enough supply.

“This may sound a bit strange, because we’re looking at a market that’s going to be drastically shrinking in the future. But it actually is a concern, particularly for higher quality or higher energy coal.

“We’re expecting a very small amount of supply growth next year for higher energy coal – around 5 percent.

“However, we usually apply a 6 percent deduction from that number to reflect disruptions like wet weather strikes, supply chain issues, and the like. So for this year, if we do see an increase, it’s likely to be very modest.”

Further insight

Talking more about the forces shaping Australian coal, Rory Simington will present at the upcoming Longwall Conference, held 18-19 March at the Rydges Resort Hunter Valley.

Learn more and register your tickets here.

About Rory Simington

Rory Simington is an analyst with Wood Mackenzie – the leading provider of data and analytics solutions for the energy and natural resources sectors. He is based in Sydney with primary responsibility for Wood Mackenzie’s thermal coal research.

Prior to joining Wood Mackenzie in 2014, Rory worked with mining and consulting companies in market analysis and business development. Rory comes from an operational background and started his career as a mining engineer in the Illawarra many (many) years ago.