Key Highlights

Indonesia's tightening of coal export controls earlier this month created a significant supply-side shock that drove thermal coal to near three-year highs, compounding the fuel-switching demand driven by the Strait of Hormuz disruption.

The US-Iran peace deal and improving Hormuz transit are now reversing the demand equation, with Asian importers reassessing their emergency coal purchases as LNG supply pathways begin to restore, creating a potential bearish double-effect for coal prices.

Indonesia's decision to tighten export controls on key commodities, including thermal coal, delivered a sharp supply-side shock to global energy markets that — combined with the fuel-switching demand created by the Strait of Hormuz disruption — briefly propelled thermal coal prices to near three-year highs earlier this month.

As the world's largest seaborne thermal coal exporter, Indonesia's policy decisions carry an outsized influence on global coal markets, particularly for benchmark Newcastle-grade thermal coal that serves as the primary price reference for Asian power utilities. The export control tightening was expected to delay shipments from the country and reduce near-term availability for key importers across Northeast and Southeast Asia.

The demand backdrop into which Indonesia's supply shock arrived was already extremely tight. The prolonged Strait of Hormuz disruption had forced Japan, South Korea, and other Asian LNG importers to dramatically increase coal consumption as an emergency substitute for their disrupted gas supplies, creating an unusual demand surge that had already pushed prices significantly higher before the Indonesian policy shift.

The US-Iran peace deal and the resulting restoration of Hormuz transit have now begun to fundamentally alter this demand equation. As LNG supply pathways from the Persian Gulf begin to normalise, Asian importers are reassessing their emergency coal procurement strategies, reducing the urgency of coal purchases and allowing some of the elevated demand premium to dissipate.

Thermal coal futures have retreated below $145 per ton, extending their pullback from recent highs as the dual drivers of the price surge — disrupted LNG supply and Indonesian export restrictions — show signs of easing. The pace of the decline will depend on how quickly Asian importers can rebuild LNG procurement schedules and how rapidly Indonesia's export controls are modified or lifted.

For thermal coal market participants, the current environment illustrates the profound influence that geopolitical developments in the Middle East and supply policy decisions in Southeast Asia can have on what might appear to be a domestically-driven commodity. The interplay between these two geographically distant factors has created a period of exceptional price volatility and a complex outlook for the remainder of 2026.

 

Question: Why does Indonesia have such significant influence over global coal prices?

Answer: Indonesia is the world's largest exporter of seaborne thermal coal, supplying approximately 30-40% of internationally traded steam coal. Major Asian economies including China, India, Japan, South Korea, and several Southeast Asian nations rely heavily on Indonesian supply. Any policy change affecting Indonesian exports — whether export controls, quota changes, or domestic consumption mandates — therefore has an immediate and material impact on global coal availability and prices, particularly for Asian buyers with limited alternative supply options.

Question: Will coal prices recover if the Hormuz situation fully normalises?

Answer: A full normalisation of Persian Gulf LNG supply would likely remove a significant portion of the emergency demand premium that has supported coal prices, particularly in Japan and South Korea. However, coal prices would not necessarily return to pre-conflict lows, as Indonesian export controls and broader structural factors in the coal market may provide some floor support. The net price direction will depend on the balance between easing emergency LNG substitution demand and any concurrent changes in Indonesian export policy and global coal supply conditions.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Readers should conduct their own research or consult a qualified financial adviser before making any investment decisions.