Coal Gains on Middle East Disruptions

Thermal coal futures eased to $130 per tonne from the one-month peak of $135.6 on May 4th, tracking slight pullback in Asian and European natural gas prices as markets assessed the availability of feedstock for power plants in the respective regions. Natural gas prices came off their peaks after the US and Iran agreed to a ceasefire, despite is fragility. Also, reports indicated that Adnoc has been able to ship some LNG despite the Hormuz blockade. Still, the tightness in global LNG availability maintained thermal coal futures over 20% higher year-to-date. The squeeze in LNG supplies due to the war in Iran for Asia drove major economies to depend on thermal coal for their power generation, lifting the bidding prices for power plant feedstock. The switching was even more drastic for Japan and Korea, which are the top consumers of high-grade thermal coal out of Australia. April imports of thermal coal in grew 40% to 5.7 million in Korea and 2.5% to 7.9 million tons in Japan.

Coal prices slipped toward $130 per ton and were on track to finish the week lower, as fuel switching by major Asian economies in response to the Middle East-driven energy supply shock proved less aggressive than initially expected. Thermal coal has served as an alternative to liquefied natural gas for power generation, particularly after the effective closure of the Strait of Hormuz disrupted roughly 20% of global LNG supply. However, recent data showed that both Japan and South Korea imported less thermal coal in April compared with March, with volumes also remaining well below the five-year average, indicating that demand has stayed relatively subdued by historical standards. Analysts also noted that the sharpest decline in LNG imports across Asia has come from China, which has reduced overseas purchases and shifted instead toward domestic coal production as well as pipeline and locally sourced natural gas, helping ease pressure on global LNG supply available to other Asian buyers.

Coal prices held above $130 per ton, below the 17-month high of $146.5 reached on March 20, but still up nearly 15% since the war began in late February. The move reflects spillover from higher oil and LNG risk premiums as failed US-Iran peace talks keep key shipping routes uncertain. Asia is leaning on coal for baseload power, with Japan extending coal plant use and South Korea easing curbs, while China boosts domestic coal output and advances coal-to-gas projects to cut import risk. The shift underscores a broader energy-security pivot as gas and oil supply fears persist. Still, any rebound in Middle Eastern energy flows could unwind recent gains, while long-term demand faces pressure from accelerating renewable energy growth and policy transitions worldwide. In corporate news, Anglo American is attracting at least three bidders for its Australian steelmaking coal assets, with Stanmore Resources, Mitsubishi Corporation and PT Buma Internasional Grup among suitors.