China's coal consumption outlook for 2026 remains highly uncertain, with industry groups and market participants divided over whether demand will increase or decline after growth nearly stalled in 2025.

In mid-December 2025, the China Coal Transportation and Distribution Association said national coal consumption in 2025 may record its first year-on-year decline since 2017, based on data of the first ten months of the year. The association attributed the drop mainly to weaker coal use in thermal power generation.

However, data from the National Bureau of Statistics of China in February 2026 showed that China's total coal consumption in 2025 actually rose 0.1% year on year. Although consumption did not decline, the increase was effectively flat.

Against this backdrop, many market participants and government-related institutions believe coal consumption growth in 2026 will remain limited. The China National Coal Association recently forecast in its 2025 Coal Industry Development Annual Report that coal consumption would post slight growth this year.

The report noted that thermal power generation fell 1% in 2025, reducing demand for thermal coal, while pig iron output dropped 3%, weighing on steel-sector coal consumption.

Among China's four major coal-consuming industries, coal chemicals was the only sector to maintain growth in coal use, supported by strong production of coal chemical products and high utilization rates at new coal chemical plants.

The association said geopolitical tensions involving the U.S, Israel and Iran, hampered oil and gas shipping routes supported a recovery in Asian coal demand and reinforced coal's role in ensuring China's energy security. Increased coal-fired power generation also boosted demand.

By sector, the association expected coal consumption in the power industry to rise slightly in 2026, as coal-fired generation continues to play a crucial peak-shaving and balancing role despite the rapid expansion of renewable energy.

According to forecasts from the China Electricity Council, China's total electricity consumption is expected to grow 5-6% this year. Although clean energy will continue replacing part of coal-fired generation, coal plants are still expected to provide backup capacity during periods of unexpectedly strong demand or insufficient renewable output.

Coal consumption in the steel sector is expected to remain broadly flat or decline slightly. China's Steel Industry Stable Growth Work Plan (2025-26) targets average annual growth of around 4% in industry value-added output, which could support steel production.

However, ongoing structural optimization, technological upgrades and decarbonization efforts are steadily reducing energy consumption per tonne of steel. Combined with uncertainty surrounding steel exports and demand, this is likely to cap coal use growth in the sector.

Coal demand in the building materials industry is expected to decline modestly, as weakness in the property market and slowing infrastructure investment continue to pressure cement demand. Although higher-end cement products may provide some support, this is unlikely to fully offset weaker overall consumption.

By contrast, coal demand from the coal chemicals sector is expected to continue growing. The industry is increasingly shifting from using coal purely as fuel toward combining fuel and feedstock applications.

Demand for fertilizers and exports of downstream coal chemical products, together with the gradual release of new production capacity, are expected to support further growth in coal use.

Still, the report cautioned that energy markets can change rapidly, particularly as many of this year's market shifts have been driven by geopolitical developments. As a result, the current forecasts remain highly dependent on evolving global conditions.

The association also stressed that as China approaches a peak plateau in coal consumption, the traditional industry model focused on scale expansion and volume growth is becoming unsustainable.

Instead, the sector is expected to focus increasingly on industrial upgrading, deeper integration with renewable energy and improved utilization of associated coal resources.

Guo Zhonghua said coal producers would continue prioritizing thermal coal supply security while strengthening flexible production and supply adjustment capabilities to better respond to changing downstream demand. He added that some newly approved and expanded coal mining capacity is expected to gradually come online.