Thermal coal is coal burned to produce heat, primarily for generating electricity. It’s the most widely consumed type of coal in the world, distinct from metallurgical (or “coking”) coal, which is used to make steel. In 2024, roughly 5,946 million metric tons of coal were burned globally for power generation alone, with China and India accounting for 71% of total consumption.
How Thermal Coal Differs From Metallurgical Coal
All coal is broadly split into two categories based on what it’s used for. Thermal coal (also called steam coal) is burned as fuel. Metallurgical coal is heated in oxygen-free ovens to produce coke, a carbon-rich material that acts as both fuel and a chemical agent inside steel blast furnaces. The two types have different quality requirements. Metallurgical coal must have very low ash content (generally under 10%), low sulfur (under 1%), and a specific balance of volatile compounds that allow it to fuse into coke. Thermal coal doesn’t need these properties. It just needs to burn hot and consistently.
Because of these looser requirements, thermal coal can come from a wider range of coal ranks and quality grades, making it cheaper. In early 2025, high-quality thermal coal from Newcastle, Australia, traded near $100 per metric ton, while lower-energy Indonesian thermal coal sold for around $50 per ton. Metallurgical coal, by comparison, was priced below $200 per ton even after a significant decline.
Coal Ranks Used as Thermal Coal
Coal forms over millions of years as buried plant material is compressed and heated underground. The longer and more intense that process, the higher the coal’s “rank,” meaning it contains more carbon and less moisture. Four main ranks exist, and three of them are commonly burned in power plants.
- Lignite (brown coal): The lowest rank, containing 25% to 35% carbon with high moisture content. It’s crumbly and has the least energy per ton, but it’s still widely used for electricity, particularly near mines where transportation costs are minimal.
- Subbituminous coal: Black but mostly dull in appearance, with 35% to 45% carbon. It delivers low-to-moderate energy and is a major fuel for power generation.
- Bituminous coal: A middle-rank coal containing 45% to 86% carbon with high heating value. This is the most versatile rank: some bituminous coal is used for power, some for steelmaking.
- Anthracite: The highest rank at 86% to 97% carbon, hard and glossy. It has the greatest energy density but is relatively rare and expensive, so it plays a small role in electricity generation.
Most thermal coal burned worldwide is bituminous or subbituminous. Lignite is used heavily in countries like Germany and India, where large deposits sit close to power stations.
How Thermal Coal Generates Electricity
The process is straightforward: coal is crushed into fine powder and blown into a furnace, where it burns at high temperature. That heat boils water in a network of tubes, producing steam under intense pressure. The steam spins a turbine connected to a generator, which converts the mechanical energy into electricity. After passing through the turbine, the steam is cooled back into water and cycled through again.
Coal-fired power plants are often built near mines to cut down on transportation costs. When that isn’t possible, coal travels long distances by rail, barge, or ocean-going ship. In the United States, trains carry nearly 70% of coal deliveries for at least part of the journey. Globally, major seaborne trade routes connect exporters like Australia, Indonesia, and South Africa with buyers across Asia and Europe.
Global Consumption and Major Markets
Despite years of climate pledges and rapid growth in renewable energy, global coal demand hit an estimated 8,805 million metric tons in 2024, a 1.5% increase over the prior year. The International Energy Agency projected demand would rise again in 2025 to 8,845 million metric tons, setting a new record. The growth is concentrated in Asia. China alone consumed roughly 4,953 million metric tons in 2025, using flexible coal-fired power plants to back up its expanding wind and solar capacity while also feeding a growing coal-to-chemicals industry.
Outside of power generation, thermal coal and lignite are burned in industrial boilers, cement kilns, and heating systems. This non-power demand reached about 1,757 million metric tons in 2024, roughly 23% of all thermal coal and lignite use. Advanced economies in Europe and North America have been reducing coal consumption steadily, but those declines are more than offset by growth in emerging markets, particularly India and Southeast Asia, where electricity demand is climbing fast and coal remains the cheapest available fuel.
Environmental Impact of Burning Thermal Coal
Coal is the most carbon-intensive fossil fuel. Burning one ton of anthracite coal releases approximately 5,680 pounds (about 2,840 kilograms) of carbon dioxide. Lower-rank coals produce somewhat less CO2 per ton because they contain less carbon, but they also deliver less energy per ton, so you need to burn more of it. On a per-kilowatt-hour basis, coal-fired electricity produces roughly twice the CO2 of natural gas.
Carbon dioxide isn’t the only concern. Coal combustion also releases sulfur oxides and nitrogen oxides, two pollutant families that contribute to acid rain, smog, and respiratory illness. The amount of sulfur released depends directly on the sulfur content of the coal being burned. Nitrogen oxide emissions vary with combustion temperature and boiler design; older, high-temperature boilers produce significantly more than modern designs with pollution controls. Coal ash, the solid residue left after combustion, contains heavy metals and requires careful disposal to avoid contaminating soil and groundwater.
Modern coal plants use scrubbers, filters, and other technology to capture a large share of these pollutants before they reach the atmosphere. But CO2 capture remains expensive and uncommon. This is the central tension in the thermal coal market: it remains cheap and abundant enough to power rapid economic development in Asia, while its emissions make it the single largest industrial contributor to climate change.
Thermal Coal Pricing and Trade
Thermal coal is traded on global commodity markets, with prices benchmarked by energy content, measured in kilocalories per kilogram (kcal/kg). Higher-energy coal commands a premium. The most widely watched benchmark is Newcastle FOB (free on board) for coal rated at 6,000 kcal/kg, which represents high-quality Australian export coal. By early 2025, that benchmark had fallen to around $100 per ton, levels not seen since the 2017 to 2019 period. Indonesian coal rated at 4,200 kcal/kg, a lower-energy product popular with price-sensitive buyers in Asia, traded near $50 per ton. South China import prices for mid-grade coal (5,500 kcal/kg) fell to about $76 per ton by mid-2025.
These price declines reflect a combination of ample supply, mild weather reducing heating demand, and continued expansion of renewables eating into coal’s share of electricity generation in some markets. Still, the sheer volume of coal being consumed globally keeps the market enormous. Even at relatively low prices, thermal coal remains a multi-hundred-billion-dollar annual trade.