Coal Rises on Tightening Supply

Coal futures climbed above $145 per ton, rebounding from one-month lows as tightening global supplies and the prolonged Middle East conflict continued to encourage a shift from gas to coal for power generation. Indonesia, the world’s largest exporter of thermal coal, reported that shipments fell 23% in August from a year earlier to their lowest level for the month in five years. The decline comes as global coal demand is on track to reach a record high this year amid gas supply disruptions stemming from the Iran war. Indonesian thermal coal exports have also been constrained by government production quotas, policy uncertainty, and a strong El Niño. The International Energy Agency said in its Coal Mid-Year Update 2026 that surging LNG prices caused by the Strait of Hormuz blockage are prompting economies including China, India, Japan, South Korea, and even Europe to increase reliance on coal-fired power generation.

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.