Key Takeaways:
Global thermal coal markets are tightening from multiple directions at once, with the Newcastle benchmark pushing past $150 a tonne for the first time in nearly two years as a deadly mine accident in China's Shanxi province and mounting policy uncertainty around Indonesian exports compound a supply crunch already deepened by the Iran war's disruption of LNG flows.
"The inventory cushion has thinned. With demand firm and supply constrained, near-term price risk remains skewed to the upside," Alexandre Claude, CEO of DBX Commodities, said.
Newcastle coal, the Asia-Pacific benchmark, traded near $150 a tonne, its highest level in almost two years, after Japan and South Korea boosted high-grade coal purchases to replace LNG supplies lost when the Strait of Hormuz was effectively closed by the U.S.-Israeli war on Iran. The strait normally handles a fifth of global oil and LNG shipments. While the U.S. and Iran agreed on a framework to reopen the waterway on June 15, officials said a return to normal supply levels will take weeks and restoring pre-war production could take years.
The supply squeeze is intensifying on multiple fronts. China's June thermal coal imports are expected to rise 27.6% from a year earlier to 27.8 million tonnes, Claude said, after a fatal explosion at a Shanxi mine last month triggered sweeping safety inspections across the country's largest coal-producing province. Indonesia's thermal coal production fell 7% in the first four months of the year versus the same period in 2025, and exports could decline about 11% to 446 million tonnes if the current pace holds, according to Scott Dendy, executive director at consultancy McCloskey. The country's plan to bring all coal exports under a new state-run company called Danantara has compounded the uncertainty.
Global supply is shrinking as demand accelerates
Rystad Energy projects the Iran war fallout alone will drive an additional 70 million tonnes of coal consumption across Asia-Pacific in 2026, with cumulative additional demand reaching 150 million tonnes by 2030 if LNG tightness persists. Global seaborne thermal coal supply is expected to decline 5.7% to 985 million tonnes in 2026, said Bryan Lim, business development manager at Argus.
Southeast Asian economies that typically buy Indonesian coal are ramping up coal-fired power output. Hotter weather is driving higher coal use in Vietnam and the Philippines, while tighter gas supplies in Thailand are expected to push imports higher this year, said Vasudev Pamnani, director at India-based I-Energy Resources. An approaching El Nino could further boost demand by reducing hydropower output in northern China and driving air-conditioning use, said Peng Qihua, associate professor at Nanjing University's School of Atmospheric Sciences.
Alternative suppliers face their own constraints
Russia, the world's third-largest coal exporter, has seen output fall as roughly two-thirds of producers operate at a loss due to a stronger rouble and rising transportation costs, Dendy said. Australia's exports are expected to rise this year, but analysts expect higher mining costs and restricted diesel supplies to limit output. South Africa is drawing increased interest from Indian buyers seeking alternatives to uncertain Indonesian supplies, Pamnani said, though DBX expects "lumpy vessel clearances and shipment timing" to hurt South African exports in June.
The Newcastle benchmark at $150 a tonne compares with a two-year average of roughly $120 and sits about 40% below the all-time high of $250 set in September 2022 during the peak of the European energy crisis. The next major catalyst for prices will be the pace of LNG supply restoration from the Gulf and the intensity of the approaching El Nino, which Australia's weather bureau declared on June 16 as set to be the strongest in decades.
This article is for informational purposes only and does not constitute investment advice.
