Coal Rises to 3-Week High

Coal prices rose above $131 per ton in late August, reaching their highest level since early August, amid firm Asian energy demand and ongoing supply risks. China’s latest stimulus signals could offer some additional support, as measures aimed at boosting domestic demand and accelerating infrastructure investment may help strengthen industrial activity and electricity consumption. A more sustained recovery in economic activity could, in turn, support power generation and coal demand. Meanwhile, Japan’s power prices have climbed to their highest level since 2023 as a heatwave drives higher cooling demand, potentially lifting thermal generation and providing some support to coal demand. The outlook will ultimately depend on power demand, generation levels, coal inventories, and broader supply conditions.

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an annual reserve of more than 100 million metric tons of production capacity and seeks to accelerate the closure of outdated mines through market-based and legal measures, while enforcing strict replacement requirements for new capacity.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.