- Geopolitical tensions drive gas-to-coal switching, boost Asian coal demand
- High-CV coal prices surge; supply remains constrained globally
The Asian thermal coal market has undergone a fundamental transformation. What began as a supply-driven rally rooted in Indonesian production cuts has been overtaken by a geopolitical shock of immense proportions. Direct attacks on LNG and oil infrastructure across the Persian Gulf have shifted the expected disruption timeline from weeks to months, triggering widespread gas-to-coal switching across the region.
Price overview
Asian thermal coal benchmarks continued their price rally (w-o-w) in the week ending 20 March 2026.
Geopolitical shock prompts paradigm shift
The Middle East conflict has escalated beyond Strait of Hormuz disruptions to direct infrastructure attacks. Qatar’s Ras Laffan LNG facilities reportedly suffered 17% destruction. Iran’s South Pars gas field — the country’s primary energy source — has been bombed. Retaliatory threats now target facilities across the UAE, Qatar, and Saudi Arabia.
What seemed a temporary disruption now resembles a sustained 2022-style energy crisis. The timeline for resolution has shifted from weeks to months, fundamentally altering the supply-demand outlook.
Gas-to-coal switching: New demand frontier
Elevated LNG prices ($19-20/MMBtu) are making coal increasingly competitive across Asia.
Taiwan offers the most immediate switching potential. Having ceased nuclear generation in 2025, gas accounts for 53% of generation while coal sits at 26.4% — down from 34% in 2023. Spare coal-fired capacity exists, with potential import upside of 6.5 mnt annually.
South Korea is already restocking. The 80% capacity cap on coal plants was lifted on 16 March, enabling further switching. Coal’s generation share could rise from 28.7% to 32-34%, representing 7.5-10.5 mnt of additional annual imports.
The Philippines presents delayed potential. Coal stocks built in late 2025 mean import impacts may materialise from March. Q1 import forecasts have been raised to 9.5 mnt, up 800,000 t y-o-y.
Japan, Thailand, Pakistan, and Bangladesh offer additional upside as switching economics become compelling.
Supply-side constraints: No relief in sight
Supply is failing to respond to higher prices with typical elasticity.
Indonesia remains tight. Daily exports are stabilising at 910,000-970,000 t, below the 2025 average of 1.31 mnt. RKAB (Work Plans and Budgets) approvals are still pending, though President Prabowo has ordered a review of 2026 quotas — creating a conflicting dynamic of current tightness versus future supply risk.
United States exports reached 3.2 mnt in January, up 13.8% m-o-m but still 5% lower y-o-y. Production constraints limit meaningful expansion; Q1 forecasts are only marginally higher.
Colombia exported 3.4 mnt in February, down 9% y-o-y, with production capped under the current government policy.
Russia production fell 7% y-o-y in February — the second consecutive monthly decline — with even newer producing regions showing weakness.
Australia: High-CV benchmark surges
Two 25,000 t trades for May delivery were concluded on globalCOAL, a coal trading platform, at $140/t FOB for 6,000 kc NAR — a dramatic catch-up from $125/t earlier in the previous week. Q2CY’26 financials surged to $147.50/t, with Cal 27 at $146.50/t. Cal 27 represents coal with a net calorific value (NCV) or energy content of approximately 27 GJ/tonne (gigajoules per tonne).
The spread between 6,000 kc and 5,500 kc is widening, with the latter unchanged at $88.50/t. This is expected to incentivise full utilisation of Australia’s washing capacity, though this remains limited.
Outlook
Base case (3-6 month disruption): LNG prices remain above $15/MMBtu; NEWC 6,000 tests $150-160/t; Indonesian supply recovers gradually; Taiwan and South Korea lead switching.
Bull case (extended conflict): LNG breaches $20/MMBtu; NEWC approaches $180/t; global supply becomes binding constraint.
Bear case (rapid resolution): LNG falls to $10-12/MMBtu; NEWC corrects to $110-120/t; switching reverses.
Conclusion
The Asian thermal coal market is now geopolitically driven. With LNG infrastructure damaged, switching economics compelling, and supply-side responses constrained, the current rally has fundamental support beyond speculative momentum. Physical traders hold the advantage in this environment, capturing opportunities where financial contracts may be mispriced. For end-users, accelerating high-CV procurement strategies is prudent, as the window for competitive pricing may narrow further in the weeks ahead.
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