IEA Projects Record Coal Consumption as China's Coal-Based Industry Cuts Crude and LNG Demand
China's coal-to-chemicals expansion and domestic gas output growth are reducing its seaborne crude and LNG exposure, the IEA's mid-year update shows.
The IEA's mid-year coal update, published Friday (2026-09-11), projected global consumption would reach a record 8.94 billion tonnes this year, up 1.2% from 2025. China's demand is forecast to rise 1% to around 5 billion tonnes, with coal-to-chemicals output and electricity demand growth both cited as contributing factors.5
ICE Brent crude front-month settled at $104.32 a barrel at Friday's (2026-09-12) close. Goldman Sachs said China's coal-based petrochemical industry, combined with electric transportation, has made it easier for the country to reduce oil consumption "without much pressure on economic activity." The data increasingly support that view.4
China's biggest coal-to-chemicals producer reported first-half 2026 profits equivalent to $1.4 billion, a record, as international crude prices rose. Investors moved quickly. Sector stocks climbed 30% between late February and mid-March 2026, Reuters reported, rewarding the industry's ability to substitute coal for crude in fertiliser and petrochemical production. China already makes 85% of its methanol and ammonia from coal, according to IEA data cited by Bloomberg.3
That feedstock shift has direct consequences for oil demand projections. Electric vehicles displaced around 1 million barrels a day of Chinese crude consumption in 2025, the IEA said, with electric trucks already making a meaningful contribution. Coal-to-chemicals conversion adds a separate substitution layer. China's dependence on crude oil imports exceeds 70%, with 92% arriving by sea, per 2024 EIA data. Every barrel that domestic coal or battery-powered transport replaces reduces that seaborne exposure, and at current crude prices the economics favour continued expansion of coal-based capacity.4,2
The natural gas picture moves in the same direction. China's natural-gas demand fell 4% from March through June 2026 compared with a year earlier, the IEA reported, while stronger domestic production pushed LNG imports down 12% over the same period. PetroChina Coalbed Methane Company produced nearly 2 billion cubic meters of deep coalbed gas in 2024, and China's total coalbed gas output was expected to reach 17 billion cubic meters in 2025, according to Zhou Lihong, the company's executive director. PetroChina is also developing a coal-rock gas project targeting 30 billion cubic meters of output by 2035.4,1
JKM front-month stood at $24.88 per million British thermal units at Friday's (2026-09-12) close. China's growing capacity to convert coal into synthetic methane gives it a domestic substitute that limits how aggressively its buyers chase seaborne spot cargoes. Japan and South Korea have no comparable backstop. The IEA now expects South Korea's coal imports to rise by more than 10% this year, partly as a hedge against elevated gas prices, with Japan's thermal coal purchases holding around 124 million tonnes after the agency revised its outlook upward.5
Hormuz tensions compound the pressure on LNG-dependent importers. The IEA noted that almost no coal moves through the Strait, but Middle East conflict has lifted coal trade as restricted LNG supplies push some power producers back toward the fuel. India's coal demand is forecast to climb 4.2% to 1.35 billion tonnes this year, with seaborne coking-coal demand rising 16 million tonnes to around 320 million tonnes as India and Indonesia lift imports.5
Supply logistics are shifting in parallel. Mongolian rail exports to China are forecast to rise by more than 50% to about 91 million tonnes this year after mine shutdowns in Shanxi tightened domestic supply, the IEA projected. That overland route underpins China's coal-to-chemicals feedstock strategy and reflects Beijing's broader impulse to cut reliance on seaborne energy flows.5
Chinese buyers have also diversified their crude sourcing. Russia shipped more than 10 million barrels to China through the Arctic's Northern Sea Route through the week of August 31, 2026, Reuters reported, as buyers increased purchases of Russian crude when Iranian supplies tightened and Hormuz concerns persisted. Yet the medium-term trajectory is toward less seaborne crude, not more. Sustained prices above $100 a barrel accelerate capital flows into coal-to-chemicals capacity; they do not reverse them.4
How fast PetroChina's deep coalbed methane programme and the broader synthetic gas push can scale relative to new Australian and US LNG export capacity reaching Asian markets remains the key variable. China's 2035 target of confirming 50 trillion cubic meters of deep coalbed gas reserves, with annual production of 40 to 50 billion cubic meters, sets a ceiling on JKM demand that grows tighter as each project milestone is met. Whether domestic supply arrives on that schedule will shape crude import volumes regardless of where Middle East tensions settle.4,1