The Coal Surge Amid Global Energy Disruptions

The ongoing conflict involving the United States and Israel against Iran has sparked significant disruptions in crude oil and natural gas supplies across the globe. However, one sector that appears to be thriving in this tumultuous environment is coal. In fact, South Africa’s Thungela Resources recently reported that its half-year profits have doubled, largely due to the increased demand for coal as countries scramble to secure energy sources amidst the crisis.

The Dirty Secret of Coal

Despite being abundant and relatively inexpensive to produce, coal is often deemed one of the most environmentally harmful fossil fuels. The mining process contributes to water pollution, and its combustion releases substantial amounts of carbon into the atmosphere, exacerbating global warming. In recent months, many nations, particularly in Asia, have changed their stance on coal production, either reversing or delaying commitments to reduce its use.

Why Are We Turning Back to Coal?

The current war has ushered in a global energy crisis. Following the onset of strikes in Tehran on February 28, 2026, Iran closed the crucial Strait of Hormuz, a transit route for about one-fifth of the world’s oil and liquefied natural gas supplies during peacetime. Negotiations to reopen this strategic waterway are ongoing. The closure has drastically curtailed oil and gas supplies, causing oil prices to skyrocket. In response, many countries are relying more heavily on coal, the most accessible alternative for maintaining energy generation.

While coal prices have also seen an increase, it remains significantly cheaper than oil and is more readily available. Asia has felt the brunt of these changes, as the region is heavily dependent on Gulf energy supplies. Notably, around 82 percent of oil and gas shipments through the Strait of Hormuz were directed towards Asia in 2022, according to the U.S. Energy Information Administration. Countries like China, India, Japan, and South Korea are among the top consumers.

Moreover, Gulf nations embroiled in the conflict have faced severe consequences from Iranian attacks. For instance, Qatar declared force majeure on delivery contracts in March after drones targeted its Ras Laffan oil facility, knocking out 17 percent of its LNG exports. The UAE and other neighboring countries have also reported damages to critical energy infrastructure, further compounding the crisis.

Where is Coal Usage Rising?

According to an analysis by Ember, a prominent energy data firm, global coal output is projected to increase by 1.8 percent by the end of 2026 compared to the previous year, defying expectations that nations would be reducing coal reliance. As the conflict has escalated, several Asian countries have revealed plans to enhance coal-fired electricity generation. For example:

• Japan has removed restrictions on older coal plants to adjust to energy shocks.
• South Korea has postponed the shutdown of coal plants that were originally slated to close by 2040.
• Bangladesh initially imposed power cuts but later ramped up coal usage.
• Thailand, the Philippines, and Vietnam have similarly increased their reliance on coal to address dwindling gas supplies.
• In Pakistan, coal-generated electricity surged by 90 percent by July compared to the same period the previous year.
• India plans to launch new coal mining projects as electricity demand increases due to rising temperatures.
• Germany has chosen not to compromise on electricity generation in light of its prior commitments to cut back on coal, while Italy has moved its coal phase-out timetable from late 2025 to 2038.

Who’s Benefiting from This Coal Revival?

Indonesia stands as the leading coal exporter globally, followed by Australia and Russia. In March, Indonesia reversed its prior intention to limit coal production to capitalize on rising prices, which have climbed from $102.20 to $131.85 per tonne in just a year. Thungela Resources in South Africa reported a doubling of profits in the first half of the year compared to the same timeframe last year, largely fueled by increased production and demand from both its South African operations and its Ensham mines in Queensland.

Thungela’s output rose by 38 percent, reaching 2.2 million tonnes, and its earnings per share shot up to 4.80 South African rand ($0.30) from 1.92 rand ($0.12) the previous year. The company anticipates that prices will remain elevated as markets gear up for winter.

What Does This Mean for Clean Energy Initiatives?

Back in 2021, over 40 nations, including Vietnam and Indonesia, pledged to reduce coal usage during the COP26 climate summit. However, not all countries, including China and India, joined this commitment. Last year, South Korea also aligned with the Powering Past Coal Alliance, aimed at enabling economies reliant on coal to transition away from this fuel. Yet, the recent Middle Eastern crisis has disrupted these plans. Many countries lack sufficient renewable energy capacity to compensate for coal’s increased use, as noted by Nick Hedley, an energy transition analyst.

Hedley emphasized that countries like Bangladesh can easily ramp up coal usage amid global gas supply shortages because they have invested heavily in coal infrastructure. Unfortunately, while coal may currently be cheaper than imported gas, it cannot compete with renewable energy in terms of cost.

Despite these challenges, it’s not all bleak. Analysts point out that any increases in coal usage in certain regions are being counterbalanced by long-term declines in Europe. In China, domestic coal production dropped this year due to stricter regulations following a tragic mine explosion. Additionally, significant investments in renewable energy by Beijing signify a shift toward cleaner alternatives.

Ultimately, the disruption of global fossil fuel supply chains might make clean energy options more attractive, urging countries to invest in sustainable solutions. As Hedley concluded, “Asian nations need to accelerate their transition to clean energy and electrification to protect themselves from future global crises.”

Key Takeaways

• The conflict involving the U.S. and Israel has led to a significant uptick in coal demand globally.
• Asian countries are reevaluating their energy strategies, increasingly relying on coal despite its environmental impact.
• Coal prices are on the rise, offering immediate financial benefits to producers like Thungela and Indonesia.
• Pressure for cleaner energy solutions remains, but the recent crisis has put a strain on the transition away from coal.