Global coal markets, particularly thermal coal, have been significantly impacted by Middle East geopolitical tensions since early 2026, Australia's Department of Industry, Science and Resources said in its latest Resources and Energy Quarterly published in July 2026.

The blockage of the Strait of Hormuz in late February 2026, combined with damage to Qatar's Ras Laffan LNG facility, cut nearly one-fifth of global LNG supply, the report said.

The supply disruption drove LNG prices sharply higher, triggering fuel switching from gas to coal in some markets, especially in Northeast Asia, which directly boosted thermal coal demand. Growth in renewable energy and a preference for domestic coal in China and India are expected to gradually reduce coal import demand over the outlook period.

Against this backdrop, thermal coal prices are expected to remain elevated through the third quarter of 2026 before gradually easing until mid-2027, the report said. As both supply and demand decline in tandem, real prices are expected to stabilize.

World imports

China's thermal coal imports have weakened as high seaborne prices turned import arbitrage negative. March imports fell around 15% year on year, with April down 30%, and the second half of 2026 is expected to remain subdued, though hot summer weather could revive import demand.

Coal's share in China's power generation mix is estimated to have fallen to 55% in 2025 from around 58% in 2024, while renewables rose to 37% from 33%. The International Energy Agency's "Coal 2025" report projected coal's share would fall to around 43% by 2030, with renewables reaching around 49%, a shift expected to pressure China's coal demand.

China's energy security goals continue to favor increasing domestic coal supply, with import demand also constrained by high domestic output, the report said. Chinese thermal coal imports are expected to gradually decline over the 2026-2031 outlook period.

India's thermal coal imports in 2026 have been broadly at normal seasonal levels, supported by ample domestic supply and historically high mine stockpiles. Coal-fired power generation in India fell around 3% in 2025 after several years of strong growth, weighed by cooler temperatures and slowing industrial activity, while renewable generation expanded further.

Renewable generation is expected to grow further over the outlook period, supported by the government's target of 500 GW of non-fossil fuel capacity by 2030. The IEA expects coal's share in India's power generation mix to fall to 60% by 2030 from around 70% in 2025, though coal will remain a core component of the country's power system.

Japan has relaxed capacity restrictions on coal-fired power units, suspending a 50% utilization cap on older, inefficient units for 12 months. This could support near-term coal demand, particularly for lower-CV grades, though imports have been broadly at normal seasonal levels due to adequate pre-conflict stockpiles. Imports could rise further if stocks are drawn down and El Nino brings a hot summer.

Japanese thermal coal imports are expected to decline by around 3% annually between 2025 and 2031 as coal is replaced by renewables and nuclear, though coal will remain an important part of the power system as data centers and advanced manufacturing drive electricity demand growth.

South Korea's thermal coal imports surged as reduced Strait of Hormuz shipping constrained LNG supply. March imports rose around 41% year on year, with April up 58%, as coal-fired generation increased to replace gas. South Korea mainly imports coal from Australia and Indonesia. April coal-fired generation is expected to have risen sharply while gas-fired generation fell, after the government removed an 80% capacity cap on coal units to stabilize energy supply and prices.

Despite the conflict-driven demand spike, South Korea's thermal coal imports have been on a downward trend in recent years as coal is replaced by non-coal sources, a trend expected to continue over the outlook period.

At the COP30 summit in late 2025, South Korea committed to phasing out unabated coal-fired power by 2040, accelerating renewable energy development and building an energy system centered on renewables and nuclear. Thermal coal import demand is expected to gradually decline over the outlook period as decarbonization and energy security efforts advance.

Vietnam's thermal coal imports continued their strong growth, rising 25% year on year in the first quarter of 2026, extending a robust trend in recent years. Coal-fired power accounts for about half of the country's generation, and domestic coal output has been unable to keep pace with electricity demand growth, driving a sharp increase in thermal coal imports.

Vietnam's economic growth is expected to remain strong, with data centers and advanced manufacturing expansion driving power demand. Two new coal-fired power plants are scheduled to come online in 2026 to meet demand, and thermal coal imports are expected to continue growing strongly.

World exports

Indonesia's government announced a sharp cut to 2026 coal production in January, though officials later said quotas had not been finalized. The government recently reiterated plans to reduce output to around 600 million tonnes in 2026 from over 800 million tonnes in 2025. Export levels are currently similar to 2025, but are expected to weaken in the second half of 2026 if production cuts are implemented.

The production cut announcement appeared to have been partially priced in before the Middle East conflict. Newcastle 6,000 Kcal/kg coal prices rose around $5-10/t after the initial January announcement, indicating supply concerns had already put upward pressure on prices. This support could persist through the second half of 2026 if Indonesian output is indeed cut.

Indonesian thermal coal demand is expected to be supported in the near term by energy market disruptions, with demand for lower-CV grades potentially strengthening as countries like Japan increase utilization of less efficient coal units. Over the outlook period, decarbonization efforts are expected to weigh on demand, and Indonesian exports are expected to gradually decline.

Colombia and South Africa have seen exports grow as energy market disruptions stimulate demand from alternative sources. Colombian thermal coal exports rose around 3% year on year in the first quarter of 2026, with April surging around 35% year on year, reflecting recent energy market disruptions from the Middle East conflict and higher exports to Asia-Pacific.

This growth contrasts with a decade-long structural decline driven by mine closures and weakening European demand. Despite the recent uptick, Colombian exports are expected to continue declining over the outlook period, constrained by domestic policies limiting production and exploration, as well as freight cost disadvantages limiting Asian market share.

South African thermal coal exports rose around 6% year on year in April, supported by stronger demand from Europe and India. Demand is expected to remain elevated during the Strait of Hormuz disruption, though higher diesel prices could pressure export volumes by increasing road transport costs from mines to ports.

Logistics conditions in South Africa have improved this year, with state rail operator Transnet making progress in rail and port operations, supporting more efficient coal transport and exports. Transnet is also increasing private sector access to the rail network, which is expected to gradually boost coal export capacity. South African thermal coal exports are expected to remain at current levels over the outlook period, supported by demand from India and Pakistan.

Australia exported 209 million tonnes of thermal coal in 2025, flat from 2024, and only the second time exports exceeded 209 million tonnes after 2019. Exports remained strong despite weather disruptions causing significant vessel backlogs at Newcastle port, which have since normalized.

Australian thermal coal exports in January-February were flat year on year, with April-June broadly at normal seasonal levels. Despite a short-term boost to thermal coal demand from energy market disruptions, Australian exports are unlikely to see substantial growth.

Australian thermal coal exports are expected to total around 205 million tonnes in 2026. By the 2030-31 fiscal year, demand from key importers China, Japan and South Korea is expected to slow due to decarbonization and domestic energy security priorities, with Australian exports expected to gradually decline to around 197 million tonnes.

Prices

Newcastle 6,000 Kcal/kg coal prices averaged $116/t before the Middle East conflict erupted in February 2026, then rose sharply to an average of $135/t in March, a 17% increase. Prices have remained around this level due to the Strait of Hormuz disruption, with the rise linked to LNG price spikes reflecting fuel switching in markets where coal and gas are interchangeable.

Assuming the Strait of Hormuz shipping substantially resumes in July, with flows normalizing by the March quarter of 2027, thermal coal prices are expected to remain elevated through 2026 under the base case scenario. Prices are expected to hold around $135/t in the September quarter, with a full-year average of around $129/t.

If El Nino brings an unusually hot northern hemisphere summer, pushing up seasonal power demand and further depleting coal and gas inventories, September quarter price peaks could be higher.

Despite short-term demand upside from energy market disruptions, renewable energy growth will reduce imports. LNG price increases and Middle East LNG supply uncertainty have boosted thermal coal demand in parts of Northeast Asia. Despite regional growth, global thermal coal imports in the April-June quarter were broadly at normal seasonal levels, with higher imports from South Korea and Taiwan offset by lower Chinese imports and normal seasonal levels from India.

The global thermal coal market is expected to be broadly balanced over the 2026-2031 outlook period, with supply and demand declining in tandem. Under this scenario, nominal prices are expected to rise with higher production costs, while real prices are expected to remain broadly stable.