Newcastle Coal Benchmark Retreats From Near Two-Year High as LNG Flows Gradually Recover
Asian coal demand from LNG substitution drives Newcastle physical coal to $119.15 a tonne on Tuesday (2026-07-07), down from a June peak as Hormuz shipping slowly normalises.
Physical Newcastle coal was trading at $119.15 a tonne on Tuesday (2026-07-07), pulling back from highs that had been the strongest in nearly two years, as the Strait of Hormuz gradually reopens and some of the immediate substitution pressure on Asian utilities eases.8
The move lower follows a June surge that took Australian Newcastle coal futures to $148.75 a tonne, according to The Star citing Indonesia's new export restrictions, which delayed shipments at the same moment Japan, South Korea and China were all scrambling to replace LNG volumes disrupted by the Hormuz blockade. That combination — constrained supply and surging demand — had produced a benchmark level not seen since mid-2024.8
Japan and South Korea led the demand shift. Kyodo News market data showed Japan's gas-based electricity supply in April (2026-04) fell to its lowest level in two years, as Japanese utilities switched toward coal to fill the shortfall from disrupted LNG imports. South Korea also increased coal procurement. Andre Lambine, an electricity analyst at S&P Global Energy, told Kyodo that the shift would deepen the longer the war continues: "The longer this war continues, the more shifts we will see."4,6
China's April power generation data, published by the Centre for Research on Energy and Clean Air, showed total output rising 6.6% year-on-year, with coal driving the gain for the fourth consecutive month. Crude oil and natural gas imports fell around 20% and 13% year-on-year in April, respectively, as Hormuz shipping disruptions bit into Chinese import volumes. Coal-fired generation filled the gap, supported by a first-quarter thermal power commissioning surge of more than 160% year-on-year, the highest on record.2
Supply has not kept pace with the demand impulse. China's domestic coal output edged down 1% in April to 385.63 million tonnes, retreating from an all-time high reached in March, according to official statistics cited by Reuters. The first four months of 2026 combined came in at 1.58 billion tonnes, down 0.1% year-on-year. Production remains near record levels, but not growing fast enough to absorb the incremental load created by reduced gas availability.5,3
European utilities added a separate demand leg. Provisional Kpler vessel-tracking data cited by Montel showed EU thermal coal deliveries on course for a five-month high in April (2026-04), rising 25% on the month and 10% on the year to 2.27 million tonnes — the highest since November 2025. Colombian supply accounted for the largest share of the increase, with exports to Europe up 48% from March to 1.12 million tonnes, as utilities built stockpiles ahead of potential further gas price spikes tied to the Middle East conflict.1
The easing from the June peak reflects the partial normalisation of Hormuz traffic since the US-Iran memorandum of June 17. ICE Endex TTF front-month, at €44.18 as of Tuesday (2026-07-07), sits below where it traded during the acute disruption phase. As more LNG cargoes clear the strait, the emergency substitution premium in coal weakens. But the normalisation is incomplete — shipping volumes through Hormuz remained well below pre-war levels through early July, leaving Asian utilities still reliant on elevated coal burn for baseload stability.8,7
China's thermal capacity expansion does not reverse easily. The Ningxia Electric Investment Yongli project — a 2×660 MW coal-fired plant under construction as of March 2026 — represents one of many additions brought forward because of the fossil fuel shortfall. Analysts cited by wealthorbitcenter.com expected continued upward pressure on coal prices if LNG shortages persist, while noting prices remain well below the peaks reached after Russia's invasion of Ukraine in 2022.2,7
The pace of Hormuz shipping recovery and any renewed Indonesian export restrictions are the two variables that will determine how quickly Newcastle coal retraces the June move, or consolidates near current levels.