Australian coal producers and sellers are receiving increased enquiries for coal supplies, driven by LNG supply disruptions resulting from the US-Iran war. But actual physical buying has been cautious so far.
Asian LNG inventories are so far ample, with South Korea likely holding sufficient LNG inventories to last more than a week. This is despite some regional importers having had their LNG vessels held up by the blockade of the strait of Hormuz, traders said.
Despite this, elevated spot LNG prices continue to deter importers from seeking replacements for cargoes impacted by the blockade or from state-owned QatarEnergy's (QE) force majeure declaration.
Taiwan has been actively procuring thermal coal supplies, with state-owned utility Taipower seeking 400,000t to be delivered in June-August through a tender closing on 17 March. The country is seeking to build thermal coal inventories to prepare for any potential shortfall in LNG supplies.
Taiwan relies heavily on LNG for power generation, with LNG accounting for about 38.8pc of the fuel mix, while coal contributes roughly 20pc, according to Taipower data. The country's peak operating reserve (POR) stood at 17.85pc on 9 March, Taipower data show. The POR is a metric used to measure the daily "power supply reliability" to maintain operations. The current POR is considered to be of "adequate supply" exceeding 10pc, while POR within 6-10pc indicates "tight supply" and anything lower represents an emergency fuel situation.
South Korean buyers have been approaching Australian coal producers for prompt supplies, but have been cautious in making purchases if prices do not match their expectations.
South Korean state-owned utility Korea South-East Power (Koen) awarded a Panamax cargo of Australian NAR 5,000 kcal/kg coal for April-loading at $80/t fob Queensland through a tender that closed on 6 March, according to market sources.
But Koen did not award any offers for its higher-calorific value (CV) coal tender. The generator likely received an offer for South African NAR 5,800 kcal/kg coal at $103/t fob Richards Bay, but it was not awarded, market participants said.
Countries like South Korea have been more exposed to LNG prices as the fuel accounts for 29pc of its power generation mix while coal accounts for 26pc, according to Korea Power Exchange (KPX) data. Utilities in South Korea typically keep coal-fired generation flat for several months with slight periodic adjustments. There has been no adjustment to coal-fired generation in March so far, remaining capped at around 40.7GWh/month in 2026, down from around 40.8GWh/month throughout 2025, KPX data showed.
Adequate Australian coal supply
Australian producers can fulfil higher demand for thermal coal. Domestic production will outpace exports by 31mn t in the July 2025-June 2026 financial year and by 36mn t in 2026-27, Australian government forecaster the Office of the Chief Economist (OCE) said in December.
Australian producers exported 128mn t of high-CV thermal coal in 2025, up by 28pc from the previous year but down from 192mn t in 2021, data from marine tracker Kpler show.
Sustained coal-to-gas switching could lead producers to wash more medium CV coal into high CV coal. Chinese-Australian producer Yancoal increased its high CV share of production from 4pc in January-March 2022 to 33pc in April-June 2022 driven by switching after Russia-Ukraine conflict escalated in February 2022.
But the gap between high CV and medium CV coal may not be high enough to warrant substantial switching yet. High CV coal traded at a $271/t premium over medium CV coal in 2022, justifying additional washing costs. In contrast, Argus' Australian NAR 6,000 kcal/kg fob Newcastle price was last assessed at $129.95/t on 9 March, just $42.25/t above its Australian NAR 5,500 kcal/kg fob Newcastle price of $87.76/t.
Producers could blend some lower-grade coking coal with thermal coal without facing additional costs. But it is too early for them to consider adjusting production schedules, a miner told Argus on 4 March.
