- European gas storage levels fall to around 29% from 36-37% last year
- Coal-fired power generation may overtake gas if conflict continues
The Atlantic thermal coal market rallied sharply in early March as European utilities began reacting to rapidly rising gas prices. Northwest European coal prices for 5,850 kcal NAR material delivered into Amsterdam-Rotterdam-Antwerp (ARA) widened significantly, with April cargoes discussed in a $128-137/t DES range, compared with around $126-127/t just a session earlier.
The rally reflects a broader shift in European power economics. As natural gas prices surge, coal-fired generation is becoming competitive again, pushing both physical and financial coal markets higher.
Coal benchmarks jump across Atlantic basin
Coal benchmarks across Europe and South Africa moved sharply higher as traders priced in stronger demand for coal-fired generation.
- API2 (Europe) April swap ~$137.9/t, up $5.9/t d-o-d
- API4 (South Africa) April swap ~$119.5/t, up by $8/t d-o-d
- DES ARA physical coal ~$135/t, up $8.75/t d-o-d
These gains illustrate the speed at which the Atlantic coal market has reacted to the tightening gas market.
At the same time, the Dutch TTF natural gas benchmark briefly surged close to EUR 70/MWh before settling around EUR 55.89/MWh, compared with EUR 53.38/MWh in the previous session, highlighting the volatility in European energy markets.
European gas inventories have also tightened significantly. EU gas storage levels are currently around 29.4% full, compared with roughly 36-37% at the same time last year, raising concerns about supply availability.
This combination of tight gas supply and geopolitical uncertainty has pushed power markets higher and made coal generation more competitive again.
Coal regains competitiveness against gas in Europe
The economics of power generation have shifted rapidly across Europe. In Germany and several other European markets, gas-fired generation has become deeply unprofitable, while coal plants are approaching or entering positive margins.
Two indicators illustrate this change:
- Clean Spark Spread (CSS) — representing the profitability of gas-fired power generation — has fallen further into negative territory, dropping below -EUR 20/MWh.
- Clean Dark Spread (CDS) — representing the profitability of coal-fired power generation — has moved back towards positive territory, indicating improved margins for coal plants.
This is already starting to influence generation patterns.
According to recent German power data, coal and gas generation produced similar levels of electricity during 1-7 March, each generating around 0.7 TWh. This parity between coal and gas generation has not been seen for some time. With gas prices continuing to rise, coal generation could overtake gas in the coming weeks, especially if the geopolitical conflict persists.
South African, Atlantic export prices follow rally
The surge in European coal demand expectations has also lifted export prices across the Atlantic basin, especially South African coal.
- RB1 6000 kcal FOB ~$118/t, up by $9/t d-o-d
- RB2 5700 kcal ~$113/t, up by $7/t d-o-d
- RB3 5500 kcal ~$100/t, up by $6/t d-o-d
Financial contracts for Richards Bay coal have also risen strongly, with API4 swaps for April trading near $119/t, up $8/t from the previous session, reflecting strong speculative and hedging activity.
In the physical market, traders reported bids for April loading cargoes at $105/t and discussions for May cargoes at $115/t. However, offers remained scarce, reflecting tightening availability. The Atlantic market is, therefore, being supported by both strong financial buying and limited physical selling.
European electricity markets also turn bullish
Power markets across Europe are reflecting the fuel price surge. In Germany, the Q2CY’26 power contract climbed to around EUR 96/MWh, up 2.8% from the previous session, after briefly touching €106/MWh earlier in the day. Coal’s growing competitiveness is one of the main reasons power prices remain firm.
Another key factor is falling renewable output in some periods. Wind output (1.7 TWh) has dropped sharply, increasing reliance on thermal generation. Lower wind availability and falling gas generation (to 0.7 TWh) have therefore reinforced demand for coal-fired power.
Global impact: Atlantic rally spreads to other coal markets
The rise in European coal prices is not confined to the Atlantic basin. Coal is a globally traded commodity, and higher European prices quickly influence price formation in other regions. Several transmission channels are already visible.
The Newcastle 6000 kcal benchmark has moved sharply higher.
- Spot NEWC 6000 ~$136.5/t, up $10/t d-o-d
- Q2 2026 contract ~$144/t, up $6/t d-o-d
- Cal 2027 ~$141/t, up $6.5/t d-o-d
The rally is partly linked to the same geopolitical factors driving European prices. Disruptions to Qatar LNG exports have raised concerns about gas supply across Asia as well, increasing interest in coal as an alternative fuel.
At the same time, supply uncertainty in Indonesia is limiting the availability of low- and mid-calorific coal. Production approvals under Indonesia’s RKAB mining plan remain incomplete, with only a fraction of producers receiving confirmed quotas so far. If production targets are indeed reduced toward 600 mnt, as discussed by policymakers, the impact on global coal supply could be significant. Indonesian exports have recently averaged around 790,000 t per day, well below the 1.35 million tonnes (mnt) daily average since 2024.
Despite the global rally, Asian physical demand remains uneven. China’s domestic coal market is currently well supplied, and prices there have softened slightly by RMB 1-2/t. Port prices in northern China recently stood around: 5500 kcal at RMB 745-755/t; 5000 kcal at RMB 662-672/t; and 4500 kcal at RMB 570-580/t. Chinese utilities continue to rely heavily on domestic coal production, which limits the country’s demand for seaborne cargoes.
Meanwhile, India also remains relatively insulated from the rally. Strong domestic production by Coal India, combined with high pithead stocks that could reach 140-150 mnt by the end of March, has reduced the need for imported coal. As a result, buying interest from Indian utilities remains cautious despite rising international prices.
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