Coal futures climbed above $145 per ton, rebounding from one-month lows as tightening global supplies and the prolonged Middle East conflict drive a renewed shift from gas to coal in power generation.

The most concrete signal of tightening comes from Indonesia. The world's largest exporter of thermal coal reported that shipments fell 23% in August from a year earlier, landing at their lowest level for the month in five years. That is a material withdrawal of tonnage from the seaborne thermal coal market at precisely the moment demand is strengthening.

The supply squeeze is not a single-cause event. Indonesian thermal coal exports have been constrained by government production quotas, policy uncertainty, and a strong El Niño. Together these factors have curbed the volume available to buyers across Asia and beyond, while prices respond to the imbalance.

On the demand side, global coal consumption is on track to reach a record high this year. The driver is gas supply disruption stemming from the Iran war. The International Energy Agency, in its Coal Mid-Year Update 2026, said surging LNG prices caused by the Strait of Hormuz blockage are prompting economies including China, India, Japan, South Korea, and even Europe to increase reliance on coal-fired power generation.

The commercial read-through is direct. Utilities that would normally burn gas are bidding harder for thermal coal cargoes, and the swing buyers are no longer confined to Asia. Europe's return to coal-fired generation adds a demand pool that competes directly with Chinese, Indian, Japanese and South Korean buyers for Indonesian and other seaborne supply.

For coal producers and traders, the arithmetic is favorable on price but constrained on volume. Indonesian miners face production quotas and policy uncertainty at home, limiting their ability to capture the demand surge even as benchmark prices recover from one-month lows above the $145 per ton mark. Exporters who can lift shipments stand to gain; those bound by quotas will watch the market from the sidelines.

For shipowners and operators in the dry bulk segment, the picture is mixed. A 23% year-on-year drop in August shipments from the largest thermal coal exporter removes capesize and panamax cargoes from Indonesian departure routes. Offsetting that, gas-to-coal switching in China, India, Japan, South Korea and Europe redirects demand toward alternative origins and longer hauls, which can support tonne-mile demand even as Indonesian volumes contract.

For power generators and industrial buyers, the message is one of cost pressure. When LNG prices surge because of the Strait of Hormuz blockage, coal becomes the fallback fuel, and that fallback is getting more expensive as supply tightens. Buyers who delayed procurement are now facing a market that has already rebounded above $145 per ton from one-month lows.

The El Niño factor adds a weather dimension to the supply side. A strong El Niño has contributed to constraining Indonesian exports, and weather-driven disruption to production and loading in the archipelago can move spot prices quickly when inventories are already stretched by record-bound demand.

Policy uncertainty in Jakarta compounds the risk. Producers cannot plan output confidently when quotas and regulations shift, and buyers pricing long-term contracts must build in that volatility. The result is a market where both sides of the trade carry elevated uncertainty.

The IEA's framing makes clear this is not a marginal shift. The agency identifies China, India, Japan, South Korea and Europe — a list spanning the world's largest coal consumers and major LNG importers — as economies increasing coal-fired generation in response to LNG prices inflated by the Hormuz blockage. When the fallback fuel is being pulled in by that many buyers simultaneously, price strength tends to persist.

The record-high demand trajectory the IEA projects for this year, set against Indonesian shipments at five-year August lows, suggests the fundamental imbalance remains intact. Unless Indonesian quotas ease or the Hormuz-driven LNG price spike unwinds, coal futures appear positioned to hold above their recent lows, with further upside risk if El Niño disruption deepens through the loading season.