Tighter thermal coal export availability from Indonesia since the country announced reduced coal production earlier this year has prompted two of Asia's major thermal coal buyers — South Korea and Japan — to seek more US thermal coal as an alternative supply source.
The shift has highlighted different procurement strategies adopted by the two markets. South Korean buyers have stepped up spot purchases of US coal to diversify supplies and enhance energy security, while Japanese buyers have sought additional cargoes through long-term contracts after some Indonesian suppliers said that they might be unable to fulfil long-term contractual commitments earlier this year, sources told Argus.
Expectations of stronger coal-fired generation this year, especially during summer months in South Korea and Japan, could further support US thermal coal demand, sources said.
South Korea's interest in US coal has been concentrated in lower-calorific value (CV) product supplied from the Powder River basin, while Japanese buyers have focused on higher-CV coal, including mid-CV material from the western US, market participants said.
Some South Korean utilities view US thermal coal as a suitable alternative to Indonesian low-CV coal because of its heat and sulphur contents, according to sources.
Western US coal export availability typically is constrained by limited terminal capacity and costs of transporting coal by rail over the relatively long distance between the mines and North American west coast ports. That limits the volume that producers can ship to overseas market. But lower-than-expected winter coal demand in part of the US left additional cargoes available, market participants said.
Japan's overall thermal coal imports in January-May were flat on the year at 40.5mn t, although imports from the US rose by 30.1pc on the year to 2.2mn t over the period, customs data show.
South Korea took 34.9mn t of thermal coal over the same period, up by 27.9pc on the year, while US coal shipments to South Korea fell by 70.3pc on the year to 416,000t during the period, according to Argus data.
The sharp decline, despite robust demand, was because of stronger Japanese purchasing reducing the availability of US export cargoes, sources said. Some western US coal producers also favoured selling coal to domestic customers at the end of last year and into early 2026.
South Korean buyers have recently secured some US thermal coal cargoes, according to sources. The country is set to receive about 219,000t of US thermal coal from Vancouver's Westshore terminal this month, Kpler data show.
Demand for US coal from South Korea and Japan is set to remain firm in the near term, with Indonesia now expected to strictly enforce existing export restrictions to meet domestic supply requirements, although whether that translates into additional purchases will largely depend on the availability of exportable US cargoes.
