Coal Hover Near 3-Month Low

Thermal coal futures held steady around $130 per ton in late July, even as coal demand in China strengthened after a relatively mild start to summer gave way to hotter weather, driving greater 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 form a heat dome. Despite the pickup in demand, China’s coal inventories remain elevated, while domestic production continues to face constraints after a fatal accident in Shanxi in late May triggered extensive safety inspections. In Indonesia, supply concerns also lent support to coal prices as dry weather disrupted coal barging operations along the Barito River in Kalimantan, a vital transport route for the country’s coal exports, with some miners reportedly declaring force majeure on affected shipments.

Thermal coal futures were at around $130 per tonne in late July, approaching its highest level in a month after touching a four-month low in late June, as supply concerns in Indonesia supported prices. 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 volumes. The disruptions raised concerns over potential shipment delays from Indonesia, the world’s largest thermal coal exporter, supporting expectations of tighter near-term availability. At the same time, rising oil prices amid escalating Middle East tensions lifted broader energy markets, with concerns over possible supply disruptions adding to upward pressure on fuel costs. Meanwhile, gains remained limited by subdued demand in China, where high inventories and cautious utility buying continued to weigh on import demand.

Thermal coal futures from Australia were at around $130 per tonne in July, not far from their lowest level since early March, as muted purchases from India offset a broader-based rebound for energy commodities. A weak rupee and an upgrade to the quantity of domestic production drove Indian utilities to extend its effort of reducing import dependency. This was combined with elevated levels of domestic inventories for the second-largest consumer to take in lower imports and soften bidding competition from other consumers. Still, energy commodities remained higher since March as fresh escalation between the US and Iran triggered another increase in power prices. LNG tankers held off from crossing the Strait of Hormuz after a vessel was struck by Iran. This supported the outlook that Japan and Korea, the main consumers of higher coal grades from Australia, are likely to maintain coal imports amid higher LNG prices.