Global thermal coal trade is undergoing a persistent, long-term contraction as major coal-consuming nations rapidly pivot toward renewable energy and gradually reduce coal-fired power generation, according to the Resources and Energy Quarterly issued by Australia's Department of Industry, Science and Resources in December 2025.

The report forecasts a 7.78% year-on-year (YoY) decline in global thermal coal trade volume for 2025, dropping to 1.12 billion tonnes, owing to estimated YoY reductions across Asia's major importers. China's import demand is expected to see the steepest YoY drop of 13.7% to 363 million tonnes, it said.

Policy restrictions and stricter safety checks led to a 2.3% YoY slide in China's domestic raw coal production in the fourth quarter of 2025, boosting import competitiveness and triggering a quarterly price rebound, it noted. Yet, full-year imports are still anticipated to be far lower than the year-ago level.

Meanwhile, a gradual shift in Asian demand is observed, the report said, moving from China towards other nations. India's thermal coal imports are projected to fall by 5.6% YoY to 168 million tonnes in 2025.

An early winter spurred continued import growth in South Korea, with October imports climbing 25% YoY following a 15% increase in the third quarter. Nonetheless, its annual imports are still expected to decrease by 2.9% YoY to 88 million tonnes. Japan's import demand remains subdued, with 2025 imports forecast at 119 million tonnes, down 3.7% YoY.

On the export side, Indonesia's shipments rebounded in September to near 2024 levels after a weak first half, particularly buoyed by recovering Chinese demand. However, its total exports for 2025 are predicted to drop 6.3% YoY from 549 million tonnes in 2024 to 514 million tonnes, as per the report.

Australia's thermal coal exports rose to 57 million tonnes in the third quarter following resumed shipments at Newcastle port, up 18.75% from 48 million tonnes in the second quarter. Vessel queues at Newcastle port remain above average levels but should fall as loading and replacement works are completed.

Continued, albeit moderating, contractions in trade volumes are expected over the next two years. The report attributes this decline to the accelerating energy transition in key importing nations like China, Japan, and South Korea. Global thermal coal trade is forecast to fall further to 1.08 billion tonnes in 2026 (-3.6% YoY) and 1.06 billion tonnes in 2027 (-1.8% YoY), according to the report.

China's thermal coal imports are anticipated to be 348 million tonnes (-4.1% YoY) in 2026 and 325 million tonnes (-6.6% YoY) in 2027. Shipments to India are estimated at 162 million tonnes for both years, down 3.6% YoY and flat, respectively. Japan and South Korea are also poised to experience import reductions, albeit with narrowing declining rates.

Exports from major suppliers are set to retreat gradually over 2026-2027, along with dropping coal-fired power generation. Indonesia's thermal coal exports are forecast to be 510 million tonnes (-0.8% YoY) in 2026 and 504 million tonnes (-1.2% YoY) in 2027, while Australia's are projected at 203 million tonnes (-0.4% YoY) and 201 million tonnes (-1.1% YoY), respectively. Domestically, Australia's own thermal coal production is also expected to fall further over the reporting period.

Despite waning demand, persistently elevated labor, infrastructure, and energy costs will favor coal prices. The thermal coal market strengthened towards the end of 2025 with the Northern Hemisphere winter.

After trading in a range of $102-105/t from mid-September to October, thermal coal prices rose to $109/t in November amid growing seasonal demand. The formation of a La Nina weather pattern could bring colder-than-average temperatures to parts of Northeast Asia in early 2026, potentially boosting coal demand and prices further.

The report forecasts the Newcastle 5,500 Kcal/kg NAR thermal coal prices to stabilize at around $109/t FOB in 2026 and slightly rebound to $113/t FOB in 2027. Nevertheless, the value of Australia's thermal coal exports is set to continue the overall downtrend.