The International Energy Agency (IEA) projects that coal consumption will reach an all-time high this year as ongoing disruptions to oil and gas trade, triggered by the closure of the Strait of Hormuz, reshape global energy markets. A significant drop in liquefied natural gas (LNG) shipments through the strait has left several nations facing energy shortfalls, compelling them to pivot toward alternative fuels.
Asian economies including Japan, India, the Philippines, South Korea, and Thailand, along with some European countries, are being forced to ramp up coal usage to fill the supply gap. Adding to the pressure, a strong El Nino event is expected this year, which is likely to boost cooling-related electricity demand in major Asian coal consumers like India and Vietnam. At the same time, high temperatures are reducing river flows, weakening hydropower output and providing further support for coal demand. Elevated oil prices are also driving higher coal consumption in China's coal-chemical sector.
The IEA now forecasts that demand for coal energy commodities will grow by 1.2% in 2026, pushing global consumption to a record 8.94 billion metric tons. As the world's two largest coal users, China and India are expected to see their coal demand rise by 1% and 4.2%, respectively, reaching 5 billion tons and 1.353 billion tons. Notably, the agency had previously anticipated a slight year-on-year decline in global coal demand.
The IEA points out that China, the world's largest coal producer, launched a nationwide safety inspection following a major mine disaster in May, which significantly curtailed domestic output and weighed on global production. After reaching a historic high in 2025, global coal production is expected to decline in 2026, yet total output is still set to stay above 8 billion tons for a third consecutive year.
European natural gas prices continue to climb, driven by intensifying supply disruptions from Middle East military conflicts and urgent stockpiling needs ahead of the winter heating season. On September 10, Dutch gas futures settled at 82 euros per megawatt-hour, up 147.7% year-on-year and 14.3% month-on-month. In terms of inventories, Europe's recent gas storage levels stand at approximately 65.83%, down about 12.7 percentage points year-on-year, marking the lowest level in recent years. Analysts believe that as the winter heating season approaches, the EU's relatively rigid refilling demand could push Eurasian LNG prices even higher.
The IEA notes that market conditions could shift again in 2027, with significant uncertainty ahead, largely depending on whether shipping through the Strait of Hormuz resumes. If LNG transportation through the strait recovers and gas prices return to pre-conflict levels, global coal demand could fall in 2027. However, if LNG shipping remains largely blocked, coal demand is likely to rise further.
GF Securities suggests that with tighter safety supervision imposing clear constraints on capacity release, domestic supply is contracting more than expected, keeping the short-term coal supply-demand balance tight. The medium-to-long-term supply contraction trend is set to continue. Leading coal companies are maintaining dividend payout ratios at 50% or higher, and as coal prices and profitability recover, the sector is poised for a dual rebound in both earnings and valuations.
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China Shenhua (01088): In the first half of 2026, the company recorded operating revenue of RMB 189.338 billion, up 7.93% year-on-year, with net profit attributable to shareholders reaching RMB 31.054 billion, an increase of 1.89%.
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China Coal Energy (01898): In the first half of 2026, the company's revenue came in at RMB 73.136 billion, down 1.8% from the same period in 2025, while profit attributable to shareholders was RMB 8.192 billion, up 11.8% year-on-year.
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