- European energy crisis drives volatility
- While Asian demand remains cautious
The global thermal coal market moved through a brief speculative rally in early March before correcting as traders booked profits and physical demand remained muted. Coal futures rose sharply at the start of the month as energy markets reacted to rising gas prices and geopolitical tensions linked to developments in the Middle East. But by 10 March, much of that move had reversed as the initial burst of speculative buying faded and underlying demand signals remained mixed.
Despite the correction, prices remain slightly above levels seen before the rally, indicating that some risk premium tied to energy market volatility remains embedded in the market.
Coal futures surge early in March
Coal futures climbed rapidly in early March as traders priced in the possibility that higher natural gas prices could push utilities toward greater coal-fired generation.
The Newcastle April 2026 contract rose from $128.75/t on 2 March to $138/t on 3 March, an increase of $9.25/t in a single session. European coal futures moved in tandem, with the API2 April 2026 contract rising from $121.50/t to $129.25/t, while South African API4 April futures climbed from $109/t to $114/t.
The rally reflected broader strength across energy markets as traders assessed potential LNG supply risks linked to tensions in the Middle East. Higher gas prices can increase coal’s competitiveness in the power sector, particularly in Europe where gas remains an important fuel in electricity generation.
The rally proved short-lived, abd by 10 March, coal futures had retreated as traders locked in gains and energy markets stabilized.
The Newcastle April contract slipped to $131.50/t, down $6.50/t from the 3 March peak. European API2 April futures declined to $122.25/t, a fall of $7/t, while API4 April contracts eased to $111/t, down $3/t over the same period. Near-term contracts also weakened. NEWC March futures fell from $133/t on 3 March to $131/t by 10 March, while API2 March contracts dropped from $127.50/t to $122/t.
Even after the pullback, Newcastle April futures remain $2.75/t higher than the $128.75/t recorded on 2 March, suggesting that some of the earlier risk premium remains in the market.
European energy crisis still supports coal
Volatility in European gas markets remains an underlying support factor for coal prices. Gas prices have fluctuated sharply amid concerns about LNG supply disruptions. When gas prices rise, coal-fired power generation becomes relatively more competitive, providing support for coal benchmarks such as API2.
Forward prices indicate that the market still expects relatively firm prices in the coming quarters. As of 10 March, API2 Q2 futures were trading around $123.75/t and Q3 contracts near $123.40/t, while Newcastle Q2 futures stood at $131.50/t and Q3 contracts near $130/t.
Asian demand remains weak
While financial markets have reacted quickly to developments in energy markets, physical demand across Asia remains uneven. China’s domestic coal market is currently well supplied, limiting demand for seaborne imports. Domestic production remains strong and utilities are continuing to rely largely on long-term supply contracts.
India is showing similar caution. Domestic supply from Coal India Ltd has increased significantly and pithead inventories are expected to reach 140–150 mnt by the end of March 2026, compared with around 107 mnt at the end of March 2025. High stock levels have reduced the urgency for Indian utilities and industrial consumers to increase imports despite higher international prices.
Indonesian supply constraints provide support
Supply-side developments in Indonesia are also influencing the market. Mining plans under Indonesia’s Rencana Kerja & Anggaran Biaya (RKAB), or Mining Work Plan and Budget, approval system for 2026 are still being finalised, and only a limited number of producers have received confirmed production approvals so far. This has slowed export shipments.
Shipping data indicates that Indonesian thermal coal exports are currently averaging around 790,000 t per day, well below the 1.35 mnt daily average recorded since 2024.
Tighter export flows have helped provide some support to the seaborne market, particularly for lower-calorific coal.
Outlook: coal market driven by energy volatility
Recent price movements highlight how closely coal markets remain tied to developments in the broader energy complex. Coal futures rallied quickly when traders priced in the possibility of gas supply disruptions and increased coal-fired generation. But the move corrected once the initial speculative surge faded and underlying demand signals remained cautious.
Looking ahead, market direction will likely depend on developments in global gas markets, geopolitical risks affecting LNG supply, Indonesian production approvals and the pace of coal imports in major Asian markets. For now, the market remains divided between financial volatility and relatively cautious physical demand.
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