LNG Disruptions Are Reshaping the Global Thermal Coal Market

 

 

April 9, 2026 - According to information released by WORLD COAL on April 3, disruptions in liquefied natural gas (LNG) supplies are driving growth in coal demand as rising natural gas prices trigger a fuel switch. Although constraints are limiting a surge on the scale seen in 2022, coal remains a key backup option for energy security, underpinning the price increases.

Alon Olsha, Senior Metals and Mining Analyst at Bloomberg Intelligence, offers insights into the latest coal trends and the impact of recent supply chain disruptions in the energy sector.

The resurgence of the global coal market is being shaped not by its own fundamentals, but by turmoil in other sectors of the energy system. This time, the catalyst is liquefied natural gas (LNG).

The sharp rise in LNG prices triggered by the war in Iran has reopened the door to a “gas-to-coal” shift in Europe and Asia.

The impact cannot be underestimated. Bloomberg Intelligence estimates that if supply disruptions persist, there could be an additional 40 million to 60 million tons of thermal coal demand, which would drive up seaborne coal prices. For a market often viewed as structurally in decline, this represents a significant reprieve.

However, this is not a repeat of 2022.

The Switch Is Real—But Limited

At first glance, the economics are compelling. Higher natural gas prices would push coal back into the priority generation sequence of power systems with existing coal-fired capacity. However, the ability to switch fuels is far from unimpeded.

In Europe, conversion capacity has declined since the last crisis due to coal-fired power plant retirements, emissions costs, and increased renewable energy penetration, though it has not been entirely eliminated. In Asia, LNG contract structures, as well as operational and logistical constraints at coal-fired power plants, have slowed the pace of adjustment.

As a result, fuel switching tends to increase gradually over weeks rather than materializing immediately. Nevertheless, a trend is emerging, with Japan and Europe already signaling plans to increase coal usage.

A Tight Market Grows Tighter

Even so, the potential scale of the shift remains substantial. A demand increase of 40 million to 60 million tons equates to 4% to 6% of global thermal coal trade volumes.

Supplies of high-calorific-value coal are even more limited, making the impact more pronounced. In this segment, the same increase accounts for nearly 10% to 15% of the total market—enough to significantly tighten supply. This dynamic offers further upside for high-calorific coal exporters, particularly those in Australia.

Prices Are Rising—But There Is a Ceiling

Coal prices have risen alongside those of liquefied natural gas (LNG). If supply disruptions persist for one to two months, Newcastle coal prices could reach $165 to $185 per ton.

However, expectations should remain moderate. Most of the conditions that drove the exceptional surge in 2022 no longer exist. At that time, both the coal and natural gas markets were constrained by simultaneous supply shocks. Today, such disruptions are primarily concentrated in the LNG sector. 

Furthermore, structural changes since 2022—including reduced coal-fired power capacity in Europe and already high coal utilization in parts of Asia—limit the scope for incremental demand.

Margins Expand—But Costs Rise

For coal producers, the near-term outlook remains positive. Higher prices are translating into strong margin expansion, particularly for miners directly serving the seaborne thermal coal market.

However, this benefit comes at a cost. Diesel prices—a key cost component—have surged significantly. For some producers, this could erode a substantial portion of their profit growth.

The result is a growing divergence within the industry. Companies with significant exposure to the seaborne thermal coal market and strong cost advantages are best positioned to capitalize on growth opportunities, while more diversified or higher-cost producers may see relatively limited gains.

A Market Defined by Interconnections

Ultimately, this situation underscores that, within a highly interconnected energy system, coal has become a residual fuel.

Coal demand is no longer driven solely by its own fundamentals, but rather by its role as a backup energy source when other fuels fail. Disruptions in liquefied natural gas (LNG) supply increase coal demand; once the disruptions are resolved, this demand disappears.

Even so, the potential for future supply disruptions will heighten perceived market risk. If coal producers can maintain self-discipline, this could establish a structural floor for higher coal price levels.

For mining companies and investors, the key question is not only the direction of the coal market but also how long the imbalances in the natural gas market will persist.

In today’s global energy landscape, the resurgence of coal depends on the decline of other energy sources. 

 

As an integrated internet platform providing benchmark prices, on April 9, the SunSirs benchmark price for thermal coal stood at RMB761.25 per ton, a decrease of 0.33% compared to the beginning of the month (RMB763.75 per ton).