Coal prices surge to over one year high as gas supply disruptions spur fuel switching

Global thermal coal prices have surged to their highest level in more than a year as disruptions in natural gas supply triggered a wave of substitution demand from the power sector.

Benchmark Newcastle coal futures, the key pricing reference for Asia, jumped about 9.3% earlier this week to around $150 per ton, the highest level since November 2024, according to market data cited by Zhitong Finance.

Coal prices in Europe also rose sharply. Thermal coal prices at Rotterdam climbed about 13% on March 2 to $119.50 per ton, marking a 52 week high.

The rally was driven mainly by disruptions to natural gas supply in the Middle East following an escalation of military conflict in the region. The situation forced the shutdown of Qatar’s Ras Laffan LNG export facility, the country’s largest liquefied natural gas plant and a key supplier that accounts for roughly 20% of global LNG exports.

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The shutdown, the first in the facility’s roughly 30 year operating history, has tightened global gas markets and pushed buyers to seek alternative fuels for power generation.

Shipping disruptions in the Strait of Hormuz have further strained energy supply chains, contributing to a sharp spike in gas prices. European natural gas prices rose as much as 30% in a single day, while Asian spot LNG prices roughly doubled over the past week.

The rapid increase in gas prices has prompted utilities, particularly in energy import dependent regions such as East Asia and Europe, to shift electricity generation from gas fired plants to coal fired power stations.

At the same time, supply concerns have added upward pressure to coal markets. Indonesia, the world’s largest exporter of thermal coal, recently signalled plans to reduce its coal production target for 2026, raising worries about tighter global supply.

Analysts said the current price surge represents the largest external shock to the coal market since the Russia Ukraine conflict in 2022. They added that strong demand and supply uncertainties could keep coal prices volatile and elevated until the geopolitical situation stabilizes.

Oil markets have also been affected, with crude prices rising close to $120 per barrel amid production cuts by several Middle Eastern producers.

Editing by Alexander Ginting