By Ulf Bergman
Following a substantial retreat in June, coal prices have traded well below recent peaks over the past month and a half. However, the benchmark futures for the Asian and European markets have traded along different paths during the period.
The front-month futures for delivery in the port of Newcastle recovered some of June’s losses during July but have since given them up and are trading a few per cent above the levels seen six weeks ago. As a result of the recent decline, the contracts are trading around ten per cent below the levels recorded in early June. However, compared with a year ago, prices are approximately nine per cent higher, as disruptions to crude oil exports from the Middle East have fuelled demand amid substitution effects.
In contrast to the recent decline for the Australian coal futures, the contracts for delivery in the Rotterdam area have been trending higher since the relative lows recorded in late June. Over the past month and a half, September futures have gained around twelve per cent, fuelled by disruptions to supply chains across the continent as lower water levels in its major rivers have affected barge traffic. As a result of the recent upward trend, prices are nearly eleven per cent higher than at the same time last year.
Seaborne Coal Volumes Remain Robust
Global seaborne coal exports were broadly in line with recent years' volumes over the past month. According to data from Signal Ocean, 117 million tonnes of the fossil fuel were dispatched in July. While the reading was more than seven per cent lower than in June, it represented a modest 1.5 per cent increase compared with the same month last year. This suggests that, even during a period of seasonal weakness, demand remains robust, following a year-on-year increase of 2.7 per cent during the first half of the year.
At the same time, global headline numbers point to modest growth in seaborne exports, while the character of the trade is changing. Beyond geopolitics and substitution trade amid crude oil disruptions, Indonesia, the world’s leading exporter of seaborne thermal coal, has seen its share of the trade decline since the beginning of the year amid new export rules. Last month, Indonesian coal exports accounted for 33 per cent of the global aggregate of seaborne volumes, down from a monthly average of 37.4 per cent over the past three years and 2.9 million tonnes lower than a year ago. Australia, the second-largest coal exporter, also recorded a decline in shipments, with July volumes 2.3 million tonnes lower, a decline of 7.2 per cent, compared with the same month last year. Still, rising exports from Russia, the US and South Africa made up the difference and contributed to overall growth in volumes.
After two months with significant year-on-year growth for exports bound for China, volumes came under renewed pressure in July. The aggregate for seaborne coal heading for China was 4.5 per cent lower than in the same month last year. Likewise, India-bound shipments were 2.7 per cent lower in July compared with the same month in 2025.
Among the leading coal destinations, continued positive momentum for shipments bound for South Korea contributed to the modest growth in seaborne volumes in July. Exports to South Korea grew by 3.1 per cent in July, extending year-on-year growth into an eighth consecutive month. While exports to Japan were lower in July than during the same month last year, base effects played a significant role, as volumes were significant last year. Still, despite the year-on-year decline last month, aggregate monthly volumes heading for Japan were among the highest in recent years.
As for Europe, where the coal futures have been trending higher over the past six weeks, exports heading to the continent have been rising in recent months. However, it is important to bear in mind that this is from a low base, as the fossil fuel has lost some of its appeal in the region, and the share of the global seaborne coal trade is around three per cent. Compared with July 2025, export volumes bound for Northwest Europe were 36 per cent higher last month, highlighting the effects of disrupted crude oil flows and substitution. Still, the supply chain disruption for coal in Europe amid barge restrictions on rivers has had a greater influence on prices.
Seasonal Recovery Should Provide Further Support for Volumes
As highlighted in a previous Insights piece from Ocean Analytics, coal volumes typically increase during the second half of the year compared to the first six months. Still, the suggestion of softer Chinese and Indian demand for seaborne coal imports over the past month may give some pause for thought. Given the dominance of the two countries, which between them import around 45 per cent of global seaborne coal, even a minor decline in demand would have a significant impact on freight demand.
Several factors indicate that the recent soft patch in Chinese and Indian demand is likely to be temporary rather than permanent. In the case of China, hot weather has fuelled higher electricity consumption for air conditioning and refrigeration, which will add to the country’s appetite for imported coal in the short term. Longer-term, the ongoing disruptions to oil and gas exports through the Strait of Hormuz will add to China’s reliance on coal in its energy production. Even if a resolution is found in the very near future, the time until China can begin rebuilding its oil inventories in earnest is measured in months. Taken together, these factors suggest that Chinese demand should recover following last month’s year-on-year decline.
Indian GDP growth has surprised to the upside in recent quarters, with data exceeding consensus expectations. The stronger-than-expected growth has fuelled higher energy demand and, given India’s reliance on coal in its electricity production, continued growth should support coal import volumes.
Beyond the two major importers, the disruptions to traffic through the Strait of Hormuz will continue to fuel coal demand in the coming months. Any return to something resembling normality will take a long time, and in the meantime, coal inventories need to be refilled ahead of the winter in the Northern Hemisphere.
In addition to demand levels, geopolitical shifts and export restrictions will affect the seaborne coal trade. A decline in shipments from Indonesia will force importers to source coal from alternative providers, often further afield. While Russian seaborne coal exports to China rose in June and July, according to Signal Ocean’s data, aggregate volumes for the first seven months of the year were nearly three per cent lower than in 2025. The development suggests that the Chinese coal trade will contribute to higher tonne-mile demand. Similarly, a higher portion of non-Indonesian coal for Indian importers would fuel higher tonne-mile demand.
Outside the two leading destinations for seaborne coal, generally robust coal demand to make up any shortfall in oil and natural gas will lead to higher demand for dry bulk tonnage. The exception is South Korea, which has recently been importing more Russian coal from ports in the Far East.
Data source: Ocean Analytics