Global seaborne thermal coal imports. (Photo: Wood Mackenzie)
Prolonged disruption to Middle East energy supplies is triggering a rebound in global thermal coal demand, as countries scramble to secure power amid constrained liquefied natural gas (LNG) flows through the Strait of Hormuz, according to Wood Mackenzie.
“In supply shocks of this scale, coal becomes a critical fallback for energy security,” Sushmita Vazirani, principal analyst, bulk commodities at WoodMac. “Despite decarbonization commitments across Asia, tightening LNG supply and elevated prices are accelerating fuel switching back to coal.”
While the Strait of Hormuz remains the world’s most critical chokepoint for oil and gas, relatively little thermal coal trade passes through it.
Regional markets are responding with fuel switching and policy shifts. In Northeast Asia, coal-fired generation remains firm despite seasonal demand weakness in the region, supported by rising LNG prices. Taiwan is preparing to restart the 2.1 GW Hsinta coal-fired power plant, which could consume approximately 5.5 metric tons (mt) annually. South Korea has increased guidance for Russian coal imports, while Japan is expected to rely more on nuclear generation, including restarts such as Kashiwazaki-Kariwa Unit 6.
In China, with gas accounting for less than 3% of power generation, the country remains relatively insulated and is shifting toward domestic coal supply. Meanwhile, India’s elevated LNG and petcoke prices are pushing industrial consumers back toward coal as a primary fuel source.
European countries, including Italy, are considering restarting coal-fired capacity, with the Amsterdam-Rotterdam-Antwerp (ARA) market particularly exposed due to its reliance on gas.
Coal prices have increased significantly across major benchmarks, according to Wood Mackenzie. FOB Newcastle 6,000 kcal/kg averaged $126 per metric ton (mt) in March, FOB Richards Bay 6,000 kcal/kg averaged $110/mt, and CFR ARA prices reached $123/mt amid gas market volatility. The company said that pre-conflict marginal costs of around $112/mt are expected to rise further, driven in part by higher crude oil prices.
“Rising diesel prices are creating a cost squeeze for coal producers, just as markets call for more supply. In Australia, heavy reliance on imported diesel adds an additional layer of risk, potentially constraining output and tightening global markets,” said Vazirani.
Source: www.coalage.com
