Even as global demand for coal rose to all time high in 2025, coal-fired power generation has declined in India and China for the first time in 50 years, says a report by the International Energy Agency (IEA). The agency points out that the global trend of coal use is expected to increase further during ongoing year due to joint impacts of middle east war and the strong El Nino that has hit the world since around mid of the year mark.
“For the first time in half a century, coal-fired power generation declined in both China and India in 2025, driven by the huge expansion of renewable energy in China and an early, unusually strong monsoon in India,” says the report. India had ‘above average’ monsoon in 2025 with 108 percent rain compared to country’s Long Term Average rainfall.
Coal use graph rising globally
The graph went in the opposite direction in many other parts of the world. “The world’s coal demand still rose by 0.3% to 8.84 billion tonnes (Bt), a new record, highlighting how declines in some major markets were offset by growth elsewhere,” the report adds.
In the US, intense electricity demand, higher natural gas prices and policy support shot up coal consumption, contrary to the broad decline seen over the past two decades.
Trade forecasts uncertain
Disruptions to shipping through the Strait of Hormuz do not directly affect coal supply, says the report, but coal markets are being affected by the crisis. The energy landscape has become volatile. The IEA report, the ‘Coal Mid-Year Update 2026’ of IEA states.
The report says that in China, and, to a lesser degree, in India, the balance between domestic and imported coal remains highly price sensitive, and therefore, trade forecasts remain uncertain.
India traverses ‘make in India’ coal route to reduce import
India’s coal production, however, says the IEA report, “is expected to set a new record at 1095 Mt in 2026, supported by the government’s continued efforts to bolster domestic supply and lower import dependence”. In 2025, India’s coal production was around 1.1 Bt for a second consecutive year, bolstered by efforts to strengthen domestic supply and reduce reliance on imports.
Coal demand in China was unchanged at 4956 million tonnes (Mt), while India’s fell by 1% to 1299 Mt.
High pithead inventories in India, though, have slowed down output momentum. Coal India Limited (CIL), which accounts for around three-quarters of India’s output, sported lower production figures in May as pithead stocks remained elevated.
High pithead inventories refer to the accumulation of mined coal or other raw materials sitting directly at the mine extraction site. “Thermal coal imports have also declined, particularly among power plants,” says the report.
India and Europe are the main reasons globally behind the decline in seaborne thermal coal demand. “India’s imports are projected to fall to around 160 Mt in 2026 from 167 Mt in 2025, as high inventories and efforts to substitute imports with domestic coal weigh on purchases from both utilities and industrial consumers,” the IEA report claims. In Europe, the main driver is the drop in Türkiye, where a drop of 8 Mt down to 30 Mt is expected, owing to weaker coal demand for power generation.