Key Takeaways:
Newcastle coal futures rose to $148.75 a ton, the highest since August 2024, as Indonesia's export rules and Shanxi safety shutdowns tightened supply just as summer power demand rises across Asia.
"Coal production recovery in Shanxi has fallen short of expectations, while intensive safety supervision continues to keep the spot market tight," Bu Tong, senior analyst at Hongze Research, said.
About 60 million tons of annual production capacity remained suspended as of June 5, according to Hongze Research. Mines that have resumed operations are still running 20 percent to 30 percent below pre-accident levels. Dalian coking coal futures rose as much as 1.9 percent to RMB1,486.5 a ton on Monday, the highest since October 2024, before paring gains. Prices have climbed about 14 percent so far this month.
The supply squeeze comes as summer power demand rises across northeast Asia and countries including Japan expand coal usage to replace liquefied natural gas after the Strait of Hormuz closure and an attack on Qatar's largest export facility disrupted about 20 percent of global gas flows. Utilization rates at Japan's coal-fired power plants, a key buyer of Australian coal, have increased compared with last year, according to Bloomberg-compiled data.
Indonesia, the world's largest coal exporter, published technical regulations on June 1 that bring coal, palm oil and ferroalloy exports under the control of a central government-owned firm, according to Reuters. Exporters of those commodities are now obliged to report their activities to a state-appointed firm, with the new system causing shipment delays and fueling expectations that Australian supply will help fill the gap.
The Shanxi accident on May 22 at a coal mine in Qinyuan County killed 82 people, injured 128 and left two missing. The aftermath triggered sweeping safety inspections across China's largest coal-producing province, with some coking coal mines remaining closed and constraining supply.
Newcastle coal at $148.75 a ton is about 14 percent above the 12-month average and compares with the all-time high of $442 a ton set in September 2022 during the European energy crisis. Dalian coking coal at current levels remains about 40 percent below its 2021 peak above RMB2,400 a ton, suggesting room for further upside if supply disruptions persist.
This article is for informational purposes only and does not constitute investment advice.
