In early December 2025, coal markets have recovered significantly, with increased demand primarily due to winter heating and higher costs for natural gas as well as strong federal government support for generation. The ongoing federal government response to the concerns about the reliability and stability of the Nation's electric grid, including the actions taken during the recent FEMA disaster declaration for Washington State to allow for the continued operation of the Centralia Coal Plant through the winter months, as well as the government's recent request to accelerate the retirement of coal-fired power plants, is further boosting confidence within the market. In a report issued this week, the International Energy Agency anticipates an increase in consumption within the United States by 2025. However, the agency continues to believe that longer term demand for coal will be decreasing over time due to continued growth in the use of renewable energy sources, nuclear generation, and natural gas as alternatives to coal for electrical power generation.
In early December 2025, there was an increase in demand for US coal due to early signs of demand for coal caused by changes to coal policy priorities, risk to reliable service during winter months, and changes in fuel economics. The demand for coal returned to a near-term relevant level in the power mix after more than a decade of declining demand based on plant closings, cheap natural gas prices, and increased renewable energy. The market improved as policymakers put more emphasis on safety and affordability of grid service. The shifting emphasis for future coal use is much different than last decade's focus on accelerating coal plant closures.
In early December, prices increased around 2.5% due to tighter near-term fundamentals and reassessing the longevity of supply. One of the significant contributors was the US Department of Energy's (DOE) emergency order for Unit 2 of the Centralia Generating Station located in Washington to remain available during winter even though it was slated to be shut down around the end of 2025. This order raised concerns regarding a higher risk of blackouts in the Northwest and led to further expectations that other coal facilities may delay retirement dates. The increase in natural gas prices also aided coal's competitiveness, with utilities holding it as a hedge against price volatility.
The market was also positively impacted by additional regulatory and political signals. The Trump Administration reaffirmed its belief in coal as a reliable baseload power source; they stated that the accelerated retirements of coal-fired power plants resulted in fewer resources available to support the reliability of the electric grid. Additionally, the Environmental Protection Agency's actions to roll back the more stringent soot regulations and modify the timelines for compliance with the coal ash regulations helped reduce anticipated operating and compliance costs for producers. Collectively, these actions created better margins and increased confidence among both coal miners and electricity generators that coal would remain a significant contributor to the electric generation mix for the foreseeable future.
The short-term outlook for coal in the United States was solidly positive headed into the 2025-2026 winter season. The International Energy Agency projected increased demand for domestically produced coal in 2025, breaking a lengthy decline in domestic coal use over the last several years. Factors such as uncertainty regarding weather patterns, limited production from renewable resources during low wind conditions, and ongoing reliability warnings issued by grid operators were expected to support ongoing demand throughout the winter season.
Following the winter months, the outlook is more evenly balanced. Policy support and reliability needs caused temporary price boosts, but structural forces associated with renewable energy growth, new improvements in the use of nuclear power, and the availability of an increasing quantity of gas, continued to put downward pressure on long-term demand for coal. The IEA's forecast is that consumption of coal globally will plateau and commence to decline towards the end of this decade. Therefore, the rally in early December is seen as cyclical (driven by weather and policy risk) and not as a sustainable reversal in the long-term trend of decreasing use of coal.
