According to CNBC Indonesia market reports from June 28, global thermal coal prices have experienced a continuous downward trend in late June. A combination of bearish factors has completely reversed the previous market strength—which was underpinned by geopolitical conflicts—pushing ICE Newcastle thermal coal futures to their lowest level since April 21 and placing clear downward pressure on the global seaborne coal market.

Authoritative trading data from Refinitiv confirms the magnitude of this decline: on June 26, the Newcastle thermal coal contract for the following month closed at $126 per tonne, a single-day drop of 1.95%. Over two consecutive trading sessions, the cumulative decline reached 2.36%, pulling the price back to the $126 mark—a significant retracement from the highs seen during the peak of geopolitical tensions in the second quarter. This downturn is not merely the result of short-term capital fluctuations; rather, it is the inevitable outcome of three fundamental factors: the unwinding of the geopolitical risk premium, the synchronized weakening of energy commodities, and a collapse in demand from key importing nations. The logic driving market pricing has undergone a fundamental shift.

I. Complete Dissipation of Middle East Geopolitical Risks and Elimination of Energy Market Premiums

The primary driver behind the strength of international oil, gas, and coal prices in the first half of the year was the fear of supply disruptions in the Strait of Hormuz stemming from the standoff between the U.S. and Iran. Markets had previously priced in a substantial geopolitical premium due to conflict risks; both crude oil and coal benefited from an influx of safe-haven capital, causing the coal-to-oil price ratio to rise and boosting the valuation of coal as an alternative energy source.

As June progressed, regional tensions eased rapidly, and the risk of conflict between the parties cooled significantly. With stability restored to this vital global energy trade artery, the geopolitical risk premium previously embedded in prices was abruptly stripped out. The crude oil market led the sharp decline, which quickly transmitted to the coal sector. On June 29, international crude oil prices experienced a precipitous drop. WTI crude closed at $69.23 per barrel, a single-day decline of 3.74%, while Brent crude fell to $71.99 per barrel, a drop of 4.34%. Both major benchmarks weakened significantly, with WTI breaking through the critical psychological threshold of $70 per barrel.

From the perspective of energy substitution, there is a strong correlation between oil/gas and thermal coal. When oil prices are high, global power plants and industrial enterprises proactively increase their use of coal-fired power, thereby boosting demand for coal procurement. Conversely, when oil prices retreat sharply, the cost advantage of natural gas and crude oil fuels returns; this causes the demand for coal-fired power as a substitute to contract rapidly, directly undermining the price support for global thermal coal and exerting sustained downward pressure on coal prices. The pessimistic sentiment triggered by the crude oil crash spread across the entire commodities sector; long positions exited energy futures en masse, further amplifying the decline in thermal coal prices.

II. Asian import trends show stark divergence; India's shrinking demand drags down the overall market

In June, Asian seaborne coal procurement volumes exhibited a structural contrast. Demand from major traditional importers—such as China, Japan, and South Korea—rose steadily; the summer peak electricity season drove power plants to replenish stocks, resulting in a marked month-on-month increase in seaborne coal arrivals—a factor that would normally provide a price floor. However, demand from India—the world's second-largest thermal coal importer—bucked the trend and fell sharply, directly offsetting the increased demand from other nations and resulting in overall weak global demand for seaborne coal.

As a core market for thermal power in the region, India relies on coal-fired generation for over 70% of its total electricity supply. Historically, the country has imported large quantities of overseas coal during the hot season to replenish inventories, acting as a key buyer supporting coal exports from Indonesia, Australia, and Russia. However, in June of this year, India proactively scaled back overseas procurement. On one hand, it ramped up domestic coal mining and increased the blending ratio of domestically produced coal, with policies explicitly aimed at reducing import dependency. On the other hand, residual inventories of previously imported high-priced coal remained, and the continued expansion of renewable energy capacity further dampened the willingness of thermal power generators to replenish stocks with overseas coal. Large volumes of seaborne coal originally destined for India have lost their intended buyers and must be diverted to other markets, resulting in an involuntary loosening of global seaborne coal supply. Amidst insufficient demand growth and a surplus of circulating supply, the bargaining power of overseas coal producers has continued to wane; consequently, Newcastle benchmark futures prices have continued to slide, acting as a second major bearish factor weighing down coal prices.

III. Market Logic Reshaped: Short-Term Downside Potential Remains for Coal Prices

Assessing current market fundamentals, the two key bullish factors that previously drove up international thermal coal prices have fully dissipated: first, the risk premium associated with Middle East geopolitical conflicts has been completely erased, removing upward support for crude oil and lowering valuations across the energy sector; second, a critical gap has emerged on the Asian demand side, where a sharp contraction in Indian imports has offset demand growth in Northeast Asia during the peak season, shifting the global supply-demand balance from tight equilibrium to a surplus.

In the short term, the downward trend in crude oil prices has yet to bottom out; sustained low oil and gas prices will continue to suppress demand for coal as a substitute fuel. Meanwhile, India’s domestic supply-security policies are unlikely to shift in the near term, making a rapid recovery in overseas coal procurement difficult and leaving international thermal coal without a strong demand floor. Compounded by persistent bearish sentiment in the futures market, Newcastle thermal coal prices are likely to remain weak, with the potential for the price center to drift even lower.

For the global coal supply chain, this price correction will reshape trade flows: surplus supplies will increasingly flow to markets with inelastic demand, such as China, expanding the room for negotiation on import prices; profit forecasts for overseas coal producers are being downgraded, and some high-cost overseas mines may be forced to curtail shipment volumes. Key market indicators to watch remain twofold: whether the situation in the Middle East escalates again and whether Indian coal import orders rebound. These two factors will determine when international thermal coal prices might halt their decline and undergo a period of recovery.

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