Asia's seaborne thermal coal imports are staging a strong rebound, driven by increased Chinese buying amid weak domestic output and higher Japanese and Korean purchases on energy security concerns following the US-Iran conflict.

Asia's seaborne thermal coal imports are expected to reach 77.49 million tonnes in June, the highest this year, up 8.42% from 71.47 million tonnes in May and 16.92% from 66.27 million tonnes a year earlier, showed Kpler data.

The overall increase in seaborne thermal coal trade in recent weeks has been led by demand from Japan and South Korea, two developed economies with greater flexibility to switch between coal and LNG for power generation.

Iran effectively shut the Strait of Hormuz after the US and Israel launched strikes on February 28, blocking 20% of global LNG supply and sending spot LNG prices soaring.

Spot LNG prices for delivery to the region surged 143% from $10.4/mmBtu in the week of Feb 27 to a peak of $25.3/mmBtu on March 20, before easing to $15.3/mmBtu in the week of June 19, still 47% above pre-conflict levels.

Seaborne thermal coal prices have also risen, with Australian high-CV coal at Newcastle port climbing 30% from $116/t at the start of the conflict to a mid-June high of above $150/t, a grade favored by Japanese and Korean utilities.

Thermal coal has maintained a price advantage over LNG since the Iran conflict erupted, a dynamic clearly reflected in trade flows.

Kpler data shows Japan's seaborne thermal coal imports are expected to reach 7.79 million tonnes in June, up 26.27% year on year and 7.33% month on month, marking a second consecutive monthly increase. South Korea's June imports are forecast at 7.08 million tonnes, up 32.58% year on year and 29.41% month on month, the highest since February.

China, the world's largest coal importer, has also stepped up seaborne purchases. Imports have risen month on month for the past three months, with Kpler estimating June arrivals at 28.34 million tonnes, up 43.42% year on year and 27.45% month on month.

China's import increase is driven by domestic supply-demand dynamics — strong thermal power demand and weakening coal output — rather than the Middle East conflict.

China's thermal power generation rose 2.1% year on year in May and 3.4% in the first five months, while coal output fell 1.7% in May to 397.22 million tonnes and dropped 0.3% in January-May to 1.98 billion tonnes, according to official data.

A major coal mine accident in late May in Qinyuan, Shanxi, triggered nationwide safety inspections, reducing domestic output and lifting prices. Imported coal has become increasingly price-competitive against domestic supply for both Indonesian low-CV and Australian high-CV grades, boosting utility purchases.

In contrast, buying interest from India, the world's second-largest coal importer, remains subdued. Kpler estimates India's June seaborne thermal coal arrivals at 12.54 million tonnes, down 1.5% from 12.73 million tonnes in May and 13.2% from 14.45 million tonnes a year earlier.

Despite sluggish domestic coal output growth since the start of the fiscal year, higher seaborne prices have curbed Indian utilities' purchasing appetite, accelerating coal stock drawdowns.

Rising renewable generation has also dampened coal-fired power demand. India's renewable power output rose 29.3% year on year in May, accounting for a record 17.9% of total generation.