Coal Gains on Middle East Disruptions

Thermal coal futures exported out of Australia fell below $145 per ton from the three-month high of $149 on September 7th as higher output from China momentarily offset the recent jump in demand. Bodies operated by the Chinese central government issued a joint notice for local miners to maintain ample output after local prices climbed to multi-year highs. Domestic thermal coal production had fallen since May after an accident at the Shanxi province prompted a series of safety inspections in the sector. This coincided with strong demand among major consumers of Australian coal grades, including Japan and South Korea, as soaring prices for LNG drove utilities to increase capacity at coal power plants. LNG supply has remained at recent peaks as the war in the Middle East halted the flow of tankers from GCC countries. Consistently, the EIA revised forecasts to reflect a 1.2% increase in coal demand this year.

Coal prices held around $145 per ton, remaining near their highest levels in three months as the IEA said disruptions from the Middle East conflict had pushed oil and natural gas prices higher, encouraging a shift toward coal-fired power generation. The IEA now forecasts global coal demand to increase 1.2% to a record 8.94 billion tons this year, reversing its previous projection for a slight decline. Although the Middle East is not a major coal producer and virtually no coal shipments pass through the Strait of Hormuz, major economies across Europe and Asia have increasingly turned to coal for power generation amid a sharp drop in LNG shipments. Higher oil prices have also prompted China to increase coal consumption for chemical production. The IEA added that global coal output is expected to decline in 2026 due largely to developments in China, where safety inspections following a major mine accident in May have significantly reduced production.

Coal prices rose above $145 a tonne, hovering near a three-month high, as the International Energy Agency warned that global consumption is set to reach a record this year. The IEA expects demand to increase 1.2% to 8.94 billion tons in 2026, reversing its earlier forecast for a decline. Higher natural gas prices, driven partly by uncertainty over LNG supplies through the Strait of Hormuz, are encouraging power generators to switch from gas to coal. This trend has been evident across major markets including China, South Korea, Japan and Europe. Strong El Niño conditions are also boosting electricity demand for cooling while reducing hydropower generation in countries such as India and Vietnam. Although expanding wind and solar capacity is limiting the growth of fossil fuels, rising global electricity demand continues to support coal consumption. The IEA warned that if LNG flows through Hormuz remain disrupted, global coal demand could reach another record in 2027.