SunSirs: Tight Supply and Demand for Seaborne Coal Drive Synchronized Rise in Global Coal Prices

Since the start of 2026, the global coal market has emerged from the prolonged downturn of recent years. With international seaborne coal supply shifting from surplus to tightness, coupled with a recovery in domestic demand and the impact of geopolitical conflicts, coal’s value as a cornerstone of energy security is being reassessed, and the global coal market has entered a new cycle.

IEA data indicates that global coal trade ended its multi-year growth trend in 2025, with annual trade volumes falling by 5% year-on-year to 1.468 billion tonnes, of which thermal coal saw a decline of 6%. The prolonged period of low prices in recent years has also led to a slowdown in growth, or even a reduction in output, on the supply side, driven by a combination of policy and market factors. In 2026, both production and export volumes in major seaborne coal exporting countries were constrained, driving a reversal in the supply-demand dynamics of the seaborne coal market.

The seaborne coal supply side is characterised by a predominance of reductions, with only partial offsetting. Indonesia, as the world’s largest thermal coal exporter, has reduced its RKAB production quotas and increased the proportion of DMO allocated to domestic supply. Cumulative seaborne coal exports in the first quarter of 2026 stood at 110 million tonnes, a year-on-year decrease of 8.0%. Should El Niño cause droughts that reduce river water levels in Kalimantan to extreme levels, this could further impact transport and exports. In Russia, production fell by 6.1% year-on-year in the first quarter due to logistical bottlenecks, labour shortages and operating losses; in Australia, exports rose by a mere 0.2% due to tighter mining permits and the depletion of older mines, leaving little room for growth. Only Mongolia saw a significant improvement in customs clearance efficiency, with both production and exports surging by over 50% year-on-year in the first quarter, becoming a source of limited incremental supply, though its impact on the seaborne market remains indirect. Production in countries such as China, India and the United States remained flat or saw only slight increases.

On the demand side, a pattern of regional divergence and notable resilience emerged. Asia accounts for nearly 90% of global coal imports. In China, thermal power demand resumed growth in the first quarter, with thermal coal inventories remaining below year-on-year levels, providing strong support for restocking ahead of the summer peak demand period; in India, domestic coal inventories are relatively ample and daily consumption by power companies is subdued, but high summer temperatures are expected to drive subsequent market demand; In Southeast Asia, where coal-fired power accounts for over 60% of the mix, domestic demand is crowding out export resources. In Japan, South Korea and Taiwan, China, LNG supply shortages have led to significant potential new demand from the switch from gas to coal. The expansion of AI computing power, frequent extreme weather events and the unstable output of renewable energy sources have reinforced the characteristic of coal-fired power being strong in the off-season and even stronger in the peak season. Coupled with rising oil and gas prices pushing up costs, this further underpins coal demand.

On the price front, the oil-to-coal price ratio has risen to historically extreme highs. Following the US-Iran conflict, the ratio peaked at 9.5 times, and currently remains at a high of 7 times (compared to a ten-year average of 4.7). Coal is clearly undervalued, and the energy pricing system is undergoing a restructuring characterised by high oil and gas prices and low coal prices, with a clear long-term trend towards price ratio normalisation. Domestic and international thermal coal prices have risen rapidly recently. Summer restocking demand from China and India, along with the implementation of Indonesia’s subsequent policies, will be key factors; the market outlook for May and June remains optimistic.

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