How a Super El Niño Could Reshape Global Coal Markets

Most countries are finding ways to reduce their use of coal and coal-burning power plants as they strive to meet climate commitments. The pariah fossil fuel has wide-ranging impacts on human health and the environment, from extraction through combustion and waste disposal.Burning coal releases fine particulate matter, sulfur dioxide, nitrogen oxides and heavy metals. Inhaling these fine particles causes or worsens asthma, chronic bronchitis, heart disease, strokes, and may even lead to premature death.Coal combustion is a leading driver of global warming, emitting massive volumes of carbon dioxide that accelerate rising global temperatures and extreme weather.This year’s strong “El Niño” temporary climate pattern is already resulting in more coal usage in India, the world’s second-largest coal consumer. For other regions like China, the top coal consumer, El Niño could result in less coal consumption.Super El NiñoThe intensifying 2026-27 “Super El Niño” is projected by the World Meteorological Organization (WMO) and the National Oceanic and Atmospheric Administration (NOAA) to be one of the most destructive climate events in 50 years.El Niños generally happen every two to seven years and last between nine and 12 months. The second year of an El Niño is often warmer than the first.A Super El Niño occurs when sea surface temperatures reach at least 3.6F (2C) above the long-term average.WMO forecasts a near-100% likelihood that El Niño will persist through February 2027 and could be the strongest ever, raising risks of extreme weather into next year. Only three very strong or Super El Niños have been recorded since 1950. The last Super El Niño occurred in 2015-16.Sample ‌Pacific Ocean temperatures in this year’s El Niño are already more than 2 degrees Celsius above normal, said the WMO via Reuters. It adds that 2027 has the potential to exceed 2024’s record-breaking heat.A Super El Niño affects global coal usage in contradictory ways by driving up power demand in some regions while disrupting coal supply chains in others.El Niño brings severe heatwaves and weaker monsoons to India, reducing local hydropower and wind output while significantly spiking air conditioning and cooling electricity demand. This frequently triggers a major surge in coal-fired power generation to bridge the energy gap.In countries like China, Japan, South Korea and Taiwan, El Niño often leads to warmer and wetter winters. In China, heavier winter rainfall south of the Yangtze River strengthens regional hydropower, which can lower the requirement for thermal coal power generation.As the world's largest thermal coal exporter, Indonesia faces drought conditions during El Niño. Low water levels in key inland rivers such as those in Kalimantan restrict coal barge load capacities and slow down transport to ports.El Niño generally brings drier weather to parts of Australia, which can lower the risk of extreme floods washing out open-cut mines and rail lines, though erratic weather variations can still cause logistical shuffles in export volumes.IndiaIn July we headlined a story, ‘Super El Niño Could Trigger a Major Coal Boom in India’:The super El Niño weather phenomenon this year will significantly boost India’s demand for coal-fired power generation over the next 12 months, as a generation gap could occur with higher temperatures, the Finland-based think tank Centre for Research on Energy and Clean Air (CREA) said in a report on Monday.The El Niño, the recurrent weather pattern driving global temperatures higher, would affect most energy systems globally, but none would be as affected as India’s, according to CREA.The El Niño, typically associated with lower wind speeds and less rainfall, could reduce India’s power generation from wind and hydropower. This will open a gap in generation, CREA warns, adding that the gap will be mostly bridged by a surge in coal power generation.“Combine the lost output from renewables and the increased demand for power, and India could face a generation gap of nearly 18 TWh,” CREA’s analysts said in the report.“Currently the most likely outcome is a surge in coal-fired power, which would release an estimated 17 million tonnes of CO2.”Four months later, we see this happening. On Oct. 31, Reuters reported that India's coal-fired generation surged at its fastest annual pace in three years in October amid a drop in hydropower generation driven by ‌the El Niño weather pattern and surging power demand from industrial activity, government data showed.Coal-fired generation rose 25.7% in October from a year ago, with its share in overall generation rising to 71.7% from 66.03% in September, according to Reuters calculations of daily data from the regulator, Grid-India.India's hydropower generation declined 26% due to weaker rainfall, the steepest drop since February 2024, putting pressure on coal-fired generation.At one point in October, 100 of India's 191 coal-fired power plants were operating with critically low fuel stocks due to a surge in power demand.Super El Niño’s effects on renewables E&E News by Politico states that “Solar power my drop in places like California and southwestern China, while hydropower dries up in the US Pacific Northwest and southern Africa.”An annual report published by the WMO in partnership with the International Renewable Energy Agency found that during 2023 and 2024, when a strong El Niño was in force for at least half of both years, solar, wind and hydropower capacity increased in some regions, but it decreased in others.Another study found that El Niño reduces the sun’s radiation — and causes solar energy deficits — in parts of the Western US, particularly California, as well as parts of South America, the Middle East and eastern China.Based on previous strong events, researchers estimated that the next super El Niño could reduce solar power by about 5 percent in California and as much as 10 percent in some parts of southeastern China…But in places where solar is the dominant renewable energy source, El Niño years could drive up demand for fossil fuels to compensate for the deficits, Cordero said. That, in turn, could temporarily increase greenhouse gas emissions in these regions.For hydropower, El Niño can have dramatic consequences. For example, a strong El Niño in 2015-16 caused water levels in Colombia’s dams to drop by as much as 70%. Hydrogeneration also decreased in parts of the continent affected by drought, such as Brazil and Ecuador.A 2017 study found hydroelectric-reliant areas in southern Africa are prone to drought during El Niño events, along with the US Pacific Northwest, parts of Central and South America, Southeast Asia and southeastern Australia.The result, like in India, is a temporary spike in fossil fuel demand. E&E News cites a report from the U.S. Energy Information Administration that found a strong El Niño in 2015 suppressed hydropower in Washington and Oregon, where it composes the largest share of electricity generation, resulting in “an increased reliance on natural gas and other fossil generation to meet electricity demand.”The Guardian reports that Greater heat can increase already high levels of coal consumption in parts of the world. El Niño brings above-average temperatures and intensifies prolonged heatwaves in south Asia by weakening monsoon rains, which increases demand for air conditioning. Coal-based power systems in Asia supply about 70% of electricity in India and approximately 55% in China.Bulls and bearsAs the world’s largest coal customer, we need to look closer at what a Super El Niño could mean. According to CRU Group, “More rainfall will weigh on Northeast Asia thermal coal demand”:But the story is more complicated than that.On the bearish side, historically, standard or strong El Niño patterns bring warmer winter temperatures and heavier rainfall across southern and central China along and south of the Yangtze River. This typically reduces heating and power generation demand while boosting regional hydropower output, lowering overall thermal coal requirements.Coal bulls counter that El Niño can trigger extreme summer heat or dry spells in specific river basins, straining local power grids and undercutting hydropower generation. When water levels drop, utilities are forced to burn more fossil fuels — including coal and backup gas —to keep up with cooling demand.While China has rapidly expanded solar, wind, and ultra-high-voltage grid connections, allowing many provinces to stabilize or cut back on coal growth, regions facing El Niño-induced water shortages or localized demand spikes still experience temporary bumps in coal burning.By Andrew Topf for Oilprice.comMore Top Reads From Oilprice.comSiemens Energy More Than Triples Dividend After Record YearChina Is Buying Oil Again After Months of Living Off Its StockpilesU.S. Traders Weigh the Cost of Taking Trump’s Russian Diesel