New Delhi: While global coal markets will remain volatile in the short term, overall demand is expected to level off and begin a gradual decline toward the end of the decade, according to International Energy Agency’s annual market report Coal 2025, released today.
The report says that in 2025, unusual weather, changes in fuel prices, and government policies led to coal demand trends that often went against traditional regional patterns, even though the long-term global outlook stayed largely the same.
Global coal demand is set to rise by 0.5% in 2025, reaching a record 8.85 billion tonnes. This marginal growth, however, masks sharp divergences at the country and regional level. The IEA notes that “key factors such as weather, fuel prices and policy decisions all shaped global coal consumption in 2025”, often producing outcomes that surprised markets.
Despite these shifts, global consumption in 2025 remains “very close to our forecast published in the previous edition of this report a year ago”, underscoring the relative stability of the medium-term outlook.
India, long considered one of the primary engines of global coal demand growth, experienced an unusual reversal in 2025. An early and intense monsoon season dampened electricity demand while simultaneously boosting hydropower generation. As a result, the IEA finds that India’s annual coal-fired power generation is “set to decline year-on-year for only the third time in the past five decades”. This weather-driven dip highlights how climate variability can now have immediate and material effects on coal markets, even in fast-growing economies.
In the United States, coal consumption moved in the opposite direction of its long-term trend. After declining by an average of 6% per year over the past 15 years, US coal demand is poised to increase by around 8% in 2025. The IEA attributes this rebound to “a combination of higher natural gas prices and a slowdown in the retirement of coal plants due to policy support led by the federal government”.
US Policy Momentum
New policy momentum has emerged in support of coal, including environmental exemptions for certain power plants, reduced royalty rates for coal mined on federal lands and measures to support plant retrofits. While these actions lifted coal demand in the short term, the IEA’s forecast still sees US coal consumption resuming its decline, falling by an average of 6% per year through 2030 as renewable capacity expands and coal retirements continue, albeit at a slower pace.
In the European Union, coal demand also diverged from recent trends, though less dramatically. Lower hydropower and wind output in the first half of 2025 led to higher coal-fired generation. Consequently, EU coal demand is expected to fall by only around 2% in 2025, “a much smaller decline than the double-digit drops in 2023 and 2024”, says the report. This illustrates how variability in renewable generation can still influence coal burn in the short term, even as the region remains firmly on a downward structural path.
China, which consumes more coal than the rest of the world combined, once again proved decisive for the global balance. Coal demand in China is on course to mirror its 2024 level, broadly in line with expectations. According to the IEA, China’s dominance makes global coal markets “very dependent on developments in China, notably those related to economic growth, government policies, energy markets, weather conditions and dynamics in the Chinese domestic coal sector”. While the forecast sees Chinese coal demand edging down slightly through 2030, the decline is slow — less than 1% per year on average — and could easily reverse if electricity demand growth accelerates, renewable integration slows or coal gasification projects expand more rapidly than expected.
Beyond 2025, the IEA concludes that global coal consumption has reached a plateau and is likely to decline modestly through the end of the decade. By 2030, global demand is forecast to be around 3% lower than in 2025, slipping below its 2023 level. Coal-fired power generation is expected to fall below its 2021 level by the end of the decade, reflecting intensifying competition from other energy sources. The report highlights that “renewable capacity [is] surging, nuclear [is] expanding steadily, and a wave of liquefied natural gas (LNG) [is] arriving on the market,” all of which will weigh on coal’s role in power generation.
Coal use in industry is expected to decline more slowly, by less than 1% per year, because substitution options remain limited in many industrial processes. This modest decline is expected to be partially offset by an increase in coal gasification plants, “mainly in China”, adding another layer of uncertainty to the outlook.
Regionally, India remains the single largest source of demand growth through 2030. The IEA forecasts that Indian coal consumption will rise by about 3% per year on average, resulting in a cumulative increase of more than 200 million tonnes. Southeast Asia is projected to see the fastest growth, with demand increasing by more than 4% annually. These trends underline the continued reliance on coal in emerging economies with rapidly expanding electricity needs, even as advanced economies continue to phase it out.
Global imports peaked in 2024 but are expected to fall by around 5% in 2025 as China and India reduced purchases amid sufficient domestic supply and sluggish demand. (Photo: PickPic)
Supply Side
On the supply side, global coal production reached a record high in 2024 and is expected to remain near that level in 2025 before declining slightly through 2030. In China, production rose strongly in the first half of 2025 but weakened later in the year due to “abundant stocks, low prices and safety campaigns”.
Indian production growth stalled in 2025 amid weak demand and difficult operating conditions caused by heavy rains, while Indonesia is set to see its first annual production decline since the Covid-19 pandemic due to shrinking international trade. The United States stands out as an exception in 2025, with coal production increasing in response to stronger domestic demand and policy support.
International coal trade has also entered a period of contraction. Global imports peaked in 2024 but are expected to fall by around 5% in 2025 as China and India reduced purchases amid sufficient domestic supply and sluggish demand. The decline in Chinese imports in 2025 triggered “the first drop in the global coal trade since 2020”, with Indonesia and Colombia experiencing particularly sharp export falls.
Looking ahead, coal imports are expected to keep shrinking in advanced economies through 2030, while China’s imports are forecast to decline by about 2.5% per year on average, mainly affecting thermal coal. Metallurgical coal, by contrast, has stronger prospects, driven by India’s expanding steel industry and limited domestic supply.
Prices have adjusted accordingly. After surging during the energy crisis following Russia’s invasion of Ukraine, thermal coal prices have fallen sharply. In 2025, prices were around 10% lower in Europe and 20% lower in Asia compared with 2024, bringing them closer to supply costs and squeezing producer margins. The IEA notes that “profits [are] shrinking accordingly”, contributing to a near standstill in mergers and acquisitions across the coal sector since 2024 (IEA).
Overall, the IEA’s Coal 2025 report portrays a market at an inflection point. Short-term fluctuations driven by weather, prices and policy can still produce surprises, but the longer-term direction is increasingly clear. As IEA Director of Energy Markets and Security Keisuke Sadamori has emphasized, global coal demand is expected “to plateau before edging down by 2030”, with China’s choices and the pace of clean energy deployment remaining the most critical variables shaping coal’s future.
(Cover photo: PickPic)