In December last year, Australia’s coal stocks experienced a momentary thrill, as the International Energy Agency announced that it expected coal demand had grown by 1 per cent last year, and would remain stable till 2027.

This led to some proudly bullish headlines for the industry, which had apparently been sheepishly hiding in the shadows of the energy transition.

This week, the IEA doubled down on this prediction, announcing that coal-fired power generation had broken a global record last year, and should remain “relatively flat” over the next three years.

If you’re anyone other than a coal miner, this might sounds a little shocking, especially when you consider that we just had the hottest January on record, around the world.

But two things can unfortunately be true at the same time. The renewable energy revolution is transforming electricity markets faster than anyone predicted, and already generates more than 30 per cent of the world’s electricity. What can also be true is that electricity demand can be growing in many countries faster than renewables can keep up, yet.

There may also be a similar dual reality for Australia’s coal miners. While the demand for coal reached another peak last year, the industry’s growth looks to be concentrated in just a handful of countries. Many of these countries aren’t reliant on Australia’s coal, or if they are, could be looking to buy much less going forward.

And some of our biggest buyers, such as Japan, Korea and Taiwan, might be reducing their coal demand altogether.

In Japan, our biggest coal buyer, coal-fired power has been in decline since 2022 and the IEA projects it could reduce by a further 16 per cent by 2027. Instead, the country is planning to reinvigorate its nuclear power, and ramp up renewable energy over the next few years.

According to the country’s latest draft energy plan, thermal energy’s share of electricity generation could be reduced by half between now and 2040. This would have a massive impact on coal mines across the Hunter valley, where there has already been a 4 million tonne cut in exports to Japan in the past financial year alone.

Japan and China account for the bulk of coal exported from the port of Newcastle. Photo: AAP

In response, many of these mines enjoyed a return to normalcy in their trade with China, and will be banking on this continuing. But after years of increased domestic production, the IEA also projects that “Chinese demand for seaborne thermal coal is expected to decrease”.

Together, China and Japan made up three-quarters of thermal coal exports from Newcastle port last year, and parallel demand slumps could be a significant price and export hurdle for the local industry to overcome.

Outside of China, there are three major growth markets for thermal coal in our region, including India, Indonesia and Vietnam.

Unfortunately though, it seems Australia’s higher cost thermal coal isn’t what many of these countries are looking for, especially at a time of growing energy security concerns, when they all have significant domestic supplies of their own.

One of the biggest growth markets for coal is India, where electricity consumption has surpassed Japan and Korea combined. The country is now the third largest solar power generator in the world, but dramatic increases in electricity demand are outpacing the roll-out of renewables and the electricity sector remains heavily dependent on coal.

This has certainly helped shore-up demand from the Carmichael mine in Queensland, formerly known as the Adani mine. The mine ramped up its production last year, and was one of our only major exporters into the Indian thermal market. In fact, it made up almost three-quarters of Australia’s total thermal coal exports to India in the past financial year.

It is unclear how many other Aussie miners will be able to crack into the burgeoning market. Under a banner of Self-Reliant India (Atmanirbhar Bharat Abhiyan), Prime Minister Modi has driven a policy to decrease India’s reliance on foreign imports, especially imported thermal coal.

As a result, what was already the world’s second-largest coal miner ramped up its domestic production by 28 per cent between 2020 and 2023 alone. By the end of this decade, the country plans to triple its underground coal mining, and produce close to 1.5 billion tonnes of coal a year.

This will have a massive impact on India’s coal mine methane emissions, but should also limit the export opportunities for Australia’s thermal coal miners hoping to pick up some of the slack from Japan.

Another major growth market is Indonesia, where coal fired electricity was up by 10 per cent last year alone. The country’s electricity master plan outlines plans to increase coal power capacity by 26.8 gigawatts over the next seven years, which could push domestic demand up by two-thirds, to 298 million tonnes of coal per year by 2037.

Unfortunately for Australia’s coal miners, Indonesia has plenty of coal of its own and can easily meet this demand by increasing production or diverting its exports. It produced more than 830 million tonnes of thermal coal last year, and bought only 1 million tonnes from us.

That brings us to Vietnam, whose coal-fired power generation grew by 14 per cent in the past year alone. This is one of our bigger thermal coal export markets, so you would think this should translate into some pretty healthy growth domestically, especially as total global coal imports were up 19 per cent in 2024.

However, Indonesia’s lower-cost product captured most of this growth, while Australia’s coal exports to Vietnam actually dropped in the past financial year. Thanks to a sliding coal price, the total export value may have dropped by almost 20 per cent in the past calendar year.

While this doesn’t mean Australia’s thermal coal miners are headed for disaster anytime soon, it does highlight just how quickly the global market is shifting, and perhaps why all the recent big money acquisitions have been in the metallurgical space.

It also highlights just how economically dangerous it is to approve any new coal mines right now, especially if taxpayers are going to be the ones picking up any stranded asset bills.

The focus has to be on investing in the industry’s transition, incentivising high-value construction industries into the mining towns that have powered the world for so long, before the world no longer needs to ship its power out of Newcastle port.

Chris Wright is climate strategy adviser at global energy think tank, Ember and founder of Climate Tracker, a non-profit climate information network