- High gas prices, LNG disruptions keep coal markets supported
- Tight inventories and gas economics reinforce coal demand in Europe
The thermal coal market across Europe and the Atlantic basin is entering a phase of tight balance and structural support, driven by elevated gas prices, low inventories and ongoing geopolitical disruption.
While coal prices have shown some corrections in recent sessions, the broader market remains firm. The key driver is not coal supply itself, but gas market tightness, which continues to support coal demand in power generation.
Gas prices elevated, support coal demand
Gas continues to be the most important factor shaping European coal demand.
Gas prices remain high on a week-on-week basis, particularly in Asia where LNG has increased sharply. At the same time, LNG flows from the Persian Gulf remain significantly below normal levels, keeping supply tight despite minor short-term corrections.
Coal prices ease slightly but remain supported
Coal prices have softened in recent sessions, but this reflects short-term adjustments rather than a change in market direction.
The decline in Newcastle prices is more visible on a week-on-week basis, indicating a correction in the Pacific market. In contrast, Atlantic benchmarks such as Richards Bay remain stable, reflecting stronger regional demand support.
Coal remains competitive versus gas
Fuel switching economics continue to favour coal in Europe.
Gas-fired generation margins remain negative, with clean spark spreads around -€21/MWh as of mid-March 2026, indicating that gas-based power generation is loss-making at current prices. Coal margins have weakened but remain relatively more viable.
This is reflected in generation data. Gas-fired generation in Germany is down around 28% year-on-year for March 2026, while coal generation has also declined, but mainly due to strong renewable output rather than economics.
When renewable generation falls, coal remains the preferred fallback fuel.
Low inventories continue to support prices
Coal inventories at ARA terminals remain structurally tight.
Despite a small week-on-week increase, stocks remain well below normal levels. This limits downside risk for coal prices and supports ongoing demand.
LNG disruptions driving coal demand
LNG supply disruptions remain a key driver of global coal markets.
Over the last five days (around 12-16 Mar 2026), LNG exports from the Persian Gulf averaged around 30-40 kt/day, compared to a normal level of about 250 kt/day since January 2025.
This sharp drop in supply is tightening global gas markets and increasing reliance on coal, particularly in Europe and Asia.
Atlantic strength supports exporters
The current market structure remains supportive for Atlantic exporters.
US coal benefits from strong European demand and relatively low domestic gas prices, which were around $3/MMBtu as of 17 Mar 2026, down roughly 4% day-on-day.
Colombian coal remains competitive into Europe due to freight advantages, while South African coal continues to balance flows between Atlantic and Asian markets. Stable Richards Bay prices reflect this balanced demand.
Spillover effects into Asia are visible
The tightening Atlantic market is already influencing Asia.
Rising LNG prices in Northeast Asia–up over 5% week-on-week–are increasing the attractiveness of coal. This is reflected in recent procurement activity, including South Korea’s 740 kt tender for May 2026 delivery, which appears to be driven by restocking needs.
Market adjusting to prolonged disruption
Three weeks into the Iran conflict, markets are beginning to adjust.
Coal is not directly impacted by supply disruptions, but indirect effects are significant. Higher diesel prices are increasing mining costs in Australia and Indonesia, while freight rates have risen across routes. A stronger US dollar has partly offset these cost pressures, but underlying inflation in production costs is building.
Outlook: coal remains supported
The near-term outlook for coal remains firm.
Gas prices are expected to stay elevated due to supply uncertainty, inventories remain low, and LNG flows are still disrupted. While coal prices may remain volatile in the short term, the underlying support remains intact.
Europe is not increasing coal use aggressively, but it cannot reduce it either.
Gas remains expensive, LNG supply is uncertain, and inventories are low. Coal continues to act as the fallback fuel.
As Europe continues to draw on Atlantic supply, the impact is spreading globally–supporting prices, tightening markets, and influencing trade flows across Asia and into India.
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