Thermal coal prices in Asia have reached high levels due to strong demand and reduced supply, and this trend is expected to continue in the coming months. These changes are particularly driven by the shift from gas to coal in Asian countries.
Reduced coal supply from Indonesia and China
Coal prices in China have recently reached their highest level in three years. This price increase is mainly related to supply constraints from Indonesia as one of the major coal exporters, as well as the government's policies in that country. Additionally, the El Niño phenomenon has disrupted cargo movements in rivers.
Indonesia's thermal coal exports have decreased due to reduced production quotas imposed by the government. At the same time, the lack of rainfall caused by El Niño has led to lower river water levels and disrupted cargo movements to export ports. These factors have significantly impacted coal supply in Asian markets.
Reduced coal production in China and its impact on prices
Coal production in China has also faced a decline this year. Following the deadliest mining disaster in 16 years in May, officials in the country have intensified security measures and announced the suspension of mining activities in several mines located in the main coal-producing region of Shanxi. Overall, China's raw coal production has decreased this year compared to last year.
However, according to government data, China's raw coal production in September increased by 6.4 percent compared to August, marking the highest level since May. Nevertheless, this figure is still 6.8 percent lower than the production level in September last year. Therefore, considering the reduced production in China, uncertainty in Indonesia's export volume due to policy changes, and strong demand for coal in Japan and South Korea, thermal coal prices are expected to remain high in the near future.
Analysts predict that demand for coal will remain strong due to the shift from gas to coal in Japan and South Korea amid Middle Eastern tensions, which will contribute to rising prices, especially for high calorific value (CV) coal.
Overall, global coal prices have increased by 30 percent compared to pre-war levels. This price increase could have significant impacts on the energy market and coal-dependent economies in the Asia region.
