Global demand for coal slumped 1.9 per cent in 2016, a record drop in demand that is not expected to change until 2022.

The International Energy Agency (IEA) Coal 2017 report said 5.36 billion tonnes of coal was used last year, the second year in row consumption dropped.

That is a combined total of 4.2 per cent over 2015 and 2016, which according the IEA is larger than the last two-year slump in the early 1990s.

The agency forecasts that by 2022 global coal demand will be 5.53 billion tonnes, which means total demand will have stagnated for more than a decade.

Coal is Australia's second largest export earner after iron ore and has weathered a difficult few years before an unexpected and sustained spot-price rise over the past 18 months.

The IEA director for energy markets Keisuke Sadamori said global energy systems were rapidly evolving and biting into coal's traditional markets.

"There is much more diversity in the fuel mix: fracked natural gas, especially cheaper fracked gas in the United States," he said.

"And costs are reducing for new technologies in both energy efficiency and renewable energy.

"Despite that, demand will remain essentially the same for the next five years.

"The share of coal in the global energy mix is forecast to decline from 27 per cent last year to 26 per cent in 2022.

"We expect coal-fired generation to increase by 1.2 per cent a year until 2022 although its share of the power mix will fall to just below 36 per cent by then."

Demand moves from west to east

Coal use is forecast to decline further in Europe, Canada, USA and China but demand will rise in rapidly developing countries in South East Asia, India, Pakistan and Bangladesh.

The IEA singles out India as being the major growing consumer of coal with coal-fired generation expected to grow there by more than 4 per cent per annum until 2022.

This may not be of great benefit to Australian coal producers with the Indian government declaring it would double its coal use by 2020, but use only domestic supplies to do so.

However, many market commentators do not believe India was positioned to become self sufficient in coal in the medium term.

Pakistan is predicted to increase its coal consumption four-fold by 2022.

Despite the reduction in coal consumption in China, the IEA still sees the nation as a significant price setter.

"China will remain the key driver although the potential for demand growth is," Mr Sadamori said.

"However the country's supply-side reforms will be critical factors for coal prices in coming years."