Coal Gains on Middle East Disruptions

Thermal coal futures steadied near $130 per ton in mid-August, moving in a sideways trading range as oil prices remained elevated amid persistent uncertainty over a US-Iran deal to end the conflict and reopen the Strait of Hormuz. Higher oil prices increase the incentive for fuel switching, particularly among energy-importing countries across Europe and Asia. Meanwhile, China’s National Development and Reform Commission and National Energy Administration released the “15th Five-Year Plan for Coal Industry Development,” which aims to lift the proportion of capacity from large, modernized coal mines to 87% and that from intelligent mines to 75% by 2030. The plan also calls for an annual reserve of more than 100 million metric tons of production capacity and seeks to accelerate the closure of outdated mines through market-based and legal measures, while enforcing strict replacement requirements for new capacity.

Thermal coal futures fell below $130 per ton in early August, hitting four-week lows as India’s coal production increased 7.51% year-on-year to 69.75 million tons in July, strengthening domestic supply and reducing the country’s reliance on imported coal. India also delivered larger coal volumes to power plants and other downstream consumers. Coal prices were further pressured by a sharp decline in oil prices following reports of an imminent agreement between the US and Iran to reopen the Strait of Hormuz. Lower oil prices reduced the incentive for fuel switching, particularly among energy-importing countries in Europe and Asia. Meanwhile, coal demand in China picked up after a relatively mild start to the summer gave way to hotter weather, driving higher air conditioner usage and increased electricity consumption.

Thermal coal futures climbed above $130 per ton ion early August, reaching more than one-month highs as coal demand in China strengthened after a relatively mild start to summer gave way to hotter weather, boosting air conditioner use and electricity consumption. Central and eastern China have been gripped by widespread hot and humid conditions as two high-pressure systems combined to create a heat dome. Despite the increase in demand, China’s coal inventories remain elevated, while domestic production continues to face constraints after a fatal accident in Shanxi in late May prompted extensive safety inspections. Meanwhile, supply concerns in Indonesia also supported prices as dry weather disrupted coal barging operations along the Barito River in Kalimantan, a key transport route for the country’s coal exports, with some miners reportedly declaring force majeure on affected shipments.