By Ulf Bergman
Coal prices rose 40 per cent in the year's first quarter before giving back a significant share as the year’s first half was shaped almost entirely by geopolitical disruption. The year began with concerns over robust supplies, which put pressure on prices. However, disruption to the flow of crude oil amid the near-closure of the Strait of Hormuz, and later a deadly accident in a Chinese coal mine, supported prices but also fuelled heightened volatility.
An Eventful First Half of the Year for Coal Prices
The July futures for delivery at the Australian port of Newcastle began the year marginally above 102 dollars per tonne, following a rather uneventful 2025 in which prices trended lower at a relatively leisurely pace. However, when the US and Israel launched their attacks on Iran, the Strait of Hormuz was effectively closed, disrupting around a fifth of the world’s seaborne exports of crude oil and LNG, which increased demand for coal. The replacement trade contributed to the contracts gaining around 23 per cent in March, adding to the 14.5 per cent gained during the year’s first two months.
Since the sizeable gains realised in March, developments have been more volatile. Hopes of a resolution, fuelled by bullish statements from the US administration, sent prices sharply lower in early April, only for them to recover most of the losses and reach 150 dollars per tonne in early June amid continued disruptions in the Strait of Hormuz and supply concerns following an accident at a Chinese mine.
Since the early-month peak, prices have again moved significantly lower as crude oil and natural gas retreat amid signs that energy exports from the Gulf could resume. The front-month Newcastle contracts have, in just over two weeks, shed around fifteen per cent and are trading in the mid-120s, halfway between the year’s high and low. The lower coal price could reflect lower demand, but may also help keep volumes flowing across the oceans.
Uneven Growth for Seaborne Coal Exports
With only a few days left of the first half of the year, data from Signal Ocean indicate that global seaborne coal exports grew by two per cent compared with the first six months of last year. A total of 675.5 million tonnes have been shipped since January, nearly fourteen million tonnes more than in the same period last year. However, the year-on-year expansion is primarily due to developments in the second quarter. In the first quarter, signs pointed towards a second year of contraction in the first half of the year. Hence, the disruption to global oil and LNG flows appears to have contributed to the relatively strong data. Still, the reading for the past six months was three per cent lower than in 2023 and five per cent below the 2024 level.
The growth in exports was not uniform across destinations. The two leading buyers of the fossil fuel, China and India, recorded declines over the past six months compared with the same period last year. In contrast, exports to Japan, South Korea and the rest of the world rose. That said, the data for China point to a tale of two periods. Following declines in the first four months of the year, May and June tell a fundamentally different story. The former month delivered year-on-year growth of approximately ten per cent, while the latter saw an expansion of 27 per cent. This development is likely to be the result of the recent accident in Shanxi province.
Among the world’s leading coal producers, only Indonesia declined despite modest growth over the past six months. Coal exports from the country were nine million tonnes lower than during the first half of 2025, a decline of four per cent. Australia, on the other hand, has seen its exports rise by seven per cent, leading to the aggregate topping the reading from 2024. Russia and South Africa recorded export growth of a similar magnitude, with the latter continuing to recover lost ground.
Prospects for the Second Half
Looking ahead to the second half of the year, beyond the seasonal weakness in July, the final six months usually see volume growth compared to the first half. In recent years, the growth between the first and the second half has been between three and twelve per cent. However, this year the calculus is more complex. As disruptions to shipping through the Strait of Hormuz contributed to rising demand for coal, the reopening and an increased likelihood of a peace deal could break the normal pattern.
If last year’s annual decline of 3.8 per cent were maintained this year, the higher exports during the first half of the year suggest that volumes during the second half would be marginally lower than during the first half of the year. There is also the risk that higher inflation amid the spike in energy prices has left lasting damage, with economic growth and coal demand under pressure in the coming months.
However, the reopening of the contested waterway is unlikely to restore normality instantly. Global supply chains for crude oil and LNG are facing severe disruptions, with effects likely to persist for many months. Additionally, there is a risk that diplomatic negotiations will break down, with hostilities recommencing. Passage through the Strait of Hormuz could be subject to a toll, which could also delay any normalisation of the flow of seaborne commodities from the Gulf. There will also be competition between the commercial use of oil and the restocking of strategic reserves.
The coal price may have retreated from its June peak, but the freight market is unlikely to follow. As long as the Hormuz reopening remains partial and diplomatic negotiations fragile, demand for seaborne coal imports should remain robust, supporting capesize, panamax and supramax freight rates.
Data source: Ocean Analytics