- Low-CV Indonesian coal underpins Asian thermal coal market
- Higher-CV coal faces mounting resistance amid elevated premiums
The Asian thermal coal market moved into mid-May with contrasting signals across calorific grades. While low-calorific Indonesian coal continued to attract steady demand from China and Vietnam, buying appetite for mid- to high-calorific cargoes remained restrained as elevated premiums and tight availability discouraged spot purchases.
The divergence became increasingly visible during the week ending 15 May, with low-CV coal continuing to find liquidity even as higher-grade segments faced growing buyer resistance.
Low-CV Indonesian coal remains market anchor
Indonesian 4,200 GAR coal remained the most actively traded segment, supported by continued Chinese demand and interest from Vietnam. Offers for June-loading cargoes were largely heard in the high-$60s/t FOB range, while trades and market indications suggested buyers remained willing to transact despite elevated pricing.
At the lower end of the spectrum, 3,400-3,800 GAR coal also continued to attract interest, although buyers became increasingly selective on quality and sulphur. Availability remained constrained, limiting sellers’ willingness to quote aggressively. Market participants indicated that low-CV coal remained supported by relatively healthy import economics into China and consistent utility demand.
At the same time, rising freight costs have started to alter buying behaviour. Some participants noted that buyers were increasingly evaluating higher-calorific coal to improve delivered energy economics, although this trend remains in its early stages.
Tight supply keeps mid-CV coal expensive
Mid- to high-CV Indonesian coal remained firm but increasingly difficult to place at prevailing premiums. Indonesian 5,800 GAR cargoes were largely indicated above $110/t FOB, with sellers reluctant to lower offers amid limited cargo availability. Trade activity remained relatively thin, reflecting buyer resistance rather than weak underlying interest.
Supply tightness continued to underpin sentiment. Export availability for several Indonesian grades remained constrained amid domestic allocation requirements, higher operating costs and limited spot cargo visibility. Market participants suggested that any increase in Indonesian production quotas later this year could ease tightness, although no immediate relief appears visible.
Newcastle rally loses momentum
Australian Newcastle coal strengthened sharply between late April and early May before showing signs of stabilization by mid-May.
FOB Newcastle 6,000 NAR prices climbed from roughly $121-126/t in late April to around $129/t by mid-May, supported by tight prompt supply and resilient regional demand. However, bid-offer activity suggested the rally was beginning to lose momentum, with forward sentiment turning more cautious.
For 5,500 NAR coal, prices continued to edge higher, although activity remained largely confined to bids and indicative levels rather than aggressive spot buying.
India largely absent from spot market
India continued to be the weakest link in regional demand. Power plant coal inventories remained above 53 mnt, sufficient for more than 17 days of consumption, reducing the urgency for spot purchases. Imported coal buyers largely remained on the sidelines, with market participants indicating that meaningful buying interest for Indonesian 4,200 GAR coal may only re-emerge at materially lower price levels.
Weak steel and sponge iron market conditions also weighed on demand. Several market participants indicated that inland sponge iron units have increasingly shifted toward domestic coal, while only coastal consumers continued to evaluate imported cargoes selectively.
South African coal attracted some restocking interest ahead of the monsoon, although bids continued to lag seller expectations.
China continues to provide price support
China remained the key source of regional strength. Domestic QHD FOB markers continued to rise steadily through mid-May across all calorific grades, reinforcing import support for lower-CV Indonesian coal. By 15 May, QHD 5,000 NAR coal had risen to nearly $110/t FOB, while 5,500 NAR moved above $122/t. Tender levels for Indonesian coal delivered into China also increased notably compared with late April levels, reflecting stronger domestic pricing support.
However, higher domestic prices did not necessarily translate into stronger appetite for premium imports. Market participants noted that landed costs of Australian coal had become less competitive relative to domestic alternatives.
Market outlook
The Asian thermal coal market is increasingly moving at two speeds. Low-CV Indonesian coal continues to benefit from stable Chinese and Vietnamese demand, while higher-CV cargoes face growing buyer resistance as premiums outpace affordability.
For now, tight supply continues to support sellers. But unless India returns meaningfully to the market or China expands buying further, higher-priced segments may struggle to sustain recent gains.
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