Coal Surges After Deadly Mine Blast in China

Thermal coal futures climbed above $137 per ton, reaching a seven-week high after a deadly gas explosion at a mine in China’s Shanxi province prompted production suspensions and intensified safety inspections across the country’s largest coal-producing region. The accident reportedly killed at least 82 people and triggered a large-scale rescue operation involving hundreds of emergency personnel. The heightened regulatory scrutiny is expected to weigh on near-term coal output, potentially affecting power generation and complicating Beijing’s efforts to maintain energy security. Earlier this month, coal prices had generally followed declines in oil and natural gas markets amid growing optimism that a US-Iran agreement could help end the conflict and reopen the Strait of Hormuz. Reports that selected UAE liquefied natural gas tankers were able to transit through the Persian Gulf also helped ease fears of supply shortages since the outbreak of the war.

Thermal coal futures were at $132.5 per tonne, trading in a tight range since easing from the 18-month high of $146 in late March, tracking the pullback in natural gas prices as markets assessed demand for alternative power sources in major economies. Gas prices eased amid reports that selected UAE liquified natural gas tankers were able to traffic through the Persian Gulf, limiting concerns of shortages since the war began. The increase in LNG this year triggered a reaction in thermal coal prices as utilities relied on coal plants to generate power. While trading off peaks, higher coal demand since the start of the conflict maintained futures 22% higher year-to-date. The switching was done in heavy concentration in 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.

Thermal coal futures eased to around $131 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.