- Coal prices remain soft despite tightening market conditions
- Higher LNG prices driving a shift toward coal, supporting demand
Market showing mixed signals
The global thermal coal market is sending mixed signals. Prices are falling in some regions, but demand and supply indicators are starting to tighten.
FOB Newcastle 6000 prices have dropped in recent sessions. This comes at a time when the broader energy market is becoming tighter. LNG prices in Northeast Asia have increased from about $18/MMBtu (Million British Thermal Units) last week to nearly $20/MMBtu now. This rise is linked to supply disruptions from the Persian Gulf due to the ongoing conflict in the Middle East.
At the same time, Indonesian coal exports are lower than normal levels, and freight costs have increased. This is pushing up the delivered cost of coal, even if FOB prices are not rising. This creates a clear gap between what prices are showing and what fundamentals are indicating.
Prices falling – but not everywhere
The table shows that high-calorific coal in the Pacific market is under pressure. Newcastle 6000 has fallen by $7 over the past week. Buyers in Asia are still cautious and are not rushing into the market. However, the Atlantic market is stronger. European coal prices (API2) have increased, supported by high gas prices and low stocks. Indonesian coal prices are also rising, with 4200 GAR up $1.5 both day-on-day and week-on-week.
This shows that the market is not moving in one direction. Some segments are already tightening.
Forward market shows stronger outlook
Even though spot prices are weak, forward prices remain higher. This means the market expects tighter conditions ahead. Buyers are currently holding back due to high freight costs and enough short-term stocks. But the forward curve suggests that this caution may not last for long.
Demand signals starting to appear
There are early signs that demand is picking up. South Korea has issued a large tender for about 740,000 tonnes of coal for prompt delivery. This is unusual because utilities normally buy separately. This looks like a coordinated move to rebuild stocks. The government has also removed limits on coal power plant utilisation. This allows more coal to be used for power generation. These actions show that buyers are preparing for tighter supply.
Gas pushing coal demand higher
The main reason for this shift is the LNG market. LNG prices have increased sharply over the past week, and supply from the Persian Gulf has been disrupted. As gas becomes expensive and uncertain, coal becomes a more attractive option. This trend may spread to other countries like Japan, Taiwan, Pakistan and Bangladesh. Coal is once again becoming a backup fuel when gas supply is tight.
Market becoming more regional
The global coal market is also becoming more fragmented. China is relying mainly on domestic coal and cheaper Russian imports. Other suppliers are not competitive there. India, on the other hand, continues to depend on Indonesian coal, especially low-calorific grades. However, rising freight and prices are making imports more expensive. This means global trade is becoming more regional and less flexible.
High stocks do not mean oversupply
Coal stocks are high in both India and China, but this does not mean the market is oversupplied. In India, coal is often located far from where it is needed, and transport limits availability. In China, not all coal can be used in the same way due to quality differences. So the market is not oversupplied – it is unevenly supplied.
Prices likely to adjust higher
The current gap between weak prices and strong fundamentals is unlikely to continue. LNG prices are rising, demand is starting to recover, and supply is tightening. Freight and production costs are also increasing. As a result, coal prices are likely to move higher in the near term.
The coal market may look weak today, but it is actually changing. Demand is slowly improving, supply is tightening, and costs are rising. Trade flows are also becoming more regional.
This is not a weak market – it is a mispriced market that is preparing for a rebound.
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