Bullish sentiment on coal price remains intact

We remain bullish on coal price direction staying elevated – at least in the foreseeable future, owing to

#1. China crackdown on over-production will lead to supply discipline: Chinese authorities now very strict about perceived coal overproduction, and the Government has already put in place a real time coal production monitoring protocol to force the industry to become more disciplined. Any breach beyond an acceptable level of 30%higher than the production quota on underground mines and 10% higher on open-cut mines will lead to criminal charges. This measure has definitely exerted an effect, as can be seen from southern China utilities, a sector which has already started to re-float tenders for imported coal, since there is a concern over domestic supply tightness - and an increase in coal burns this summer depleted their inventory.

#2. Chinese and Indian inventory now trending down: Both Chinese and Indian coal inventories are in a decline, by 3%/38% to 741/32Mt, respectively, supported by high coal burns during this summer. Thus, we should anticipate how these two main coal buyers in seaborne markets will re-start their purchase of coal again, in preparation for winter. With such a limited coal supply situation, Chinese and Indonesian coal prices should remain well-supported ahead.

#3. EU is refilling their LNG storage too slowly: EU storage level now sits at only around 60% of capacity, 10-20% behind normal levels. So far, using a 5-year average refill rate per month, the expected inventory by early November should be around 71.4%, which is in fact 5% below the 2021 level. However, EU Commisioners are still confident that the region will top an 80% storage level by winter. This will thus lead to a situation where the EU will have to pay a higher price in order to secure more cargo. Otherwise, they will have to implement a more aggressive energy conservation policy. Any technical breakdown or disruption in global LNG flows will increase the risk of an energy shortfall and higher energy prices.

ICI continues upward, despite all the challenges

Despite all the evident concerns in the Indonesian coal sector, the ICI coal price continues to rise, on the back of limited supply (ICI 1/2/3/4/5 increased by 23.6/27.7/37.2/42/30% to USD 126.3/102.3/83.6/64.6/40.2 per ton), high coal burns, winter stocking and positive developments on a revival of Chinese coal import demand. The shortage is real, and coal is key in both domestic and seaborne markets. On the domestic front, it was driven by a limited mining quota granted this year, higher DMO to help PLN ease its coal shortfall and the climate effect, resulting in abnormally low water levels in both Sumatra and Kalimantan, a development which also starts to negatively affect barging operations. As for the seaborne market, it is mainly driven by China supply discipline and stricter limits on potential overproduction.

At this juncture, Indonesian coal buyers are also taking a wait-and-see stance before any 2027 term contract commitment: first, they want to see how the DSI implementation will affect supply and trade flows, as well as what volume of 2027 mining quota will be awarded to miners and how large next year’s DMO portion will be.

Coal Sector - Keep Burning

Coal Sector - Keep Burning

Muhammad Fariz

Coal Sector

28 August 2026 - 07.45am

Coal Sector - Keep Burning

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