Coal miners are set to gain from increasing coal prices, driven by the ongoing Iran conflict, according to market analysts at Bloomberg Intelligence. The disruption in liquefied natural gas (LNG) supply has sent shockwaves through the energy sector, prompting investors and stakeholders to closely monitor market developments.
Bloomberg Intelligence reports that if the Iran war continues to affect LNG supplies for several more weeks, coal prices could climb significantly, potentially reaching between $165 and $185 per tonne. Even at a spot price of $135 per tonne, companies like Glencore could see annual earnings from thermal coal rise by 10%, and by 12% from other commodities. Meanwhile, miners such as Yancoal and New Hope might experience earnings growth of around 60% before accounting for fuel cost increases.
Industrial terms explained :
- Panamax rates: These refer to the shipping costs for vessels that are sized to fit through the Panama Canal, a key route for transporting commodities like coal.
- Parity gap: This is the price difference at which generating electricity from gas or coal becomes equally economical, influencing fuel-switching decisions by utilities.
- Spot procurement: This term describes immediate purchases made on the open market, as opposed to long-term contractual agreements.
While there is potential for coal prices to respond to LNG disruptions, Bloomberg Intelligence notes that the market is unlikely to see a repeat of the 2022 rally, when both coal and gas prices surged due to simultaneous supply shocks, including sanctions on Russian coal and weather-related issues in Australia. The capacity for further gas-to-coal switching is now more limited: European coal-fired power generation has declined since 2022, and North Asian utilities face constraints from existing LNG contracts and operational limits at coal plants.
In Asia, many power systems already depend heavily on coal, reducing the room for further switching. According to senior industry analyst Alon Olsha, the unique factors that fuelled the 2022 coal price surge are largely absent today. Nonetheless, sustained tightness in LNG supply can still push coal prices higher. Analysts use the concept of “coal parity”—the price at which generating power from coal matches the cost of LNG generation—to estimate potential price movements. In practice, however, coal rarely reaches full parity due to limitations such as plant availability, contractual commitments, and policy restrictions. Olsha suggests that coal is more likely to capture only part of the parity gap.
For coal demand to rise meaningfully, the LNG disruption would likely need to persist for one to two months. The Iran conflict has already increased the Newcastle coal price by 20%, as higher LNG costs encourage Asian utilities to switch fuels where possible. If spot Newcastle prices remain around $134 per tonne, New Hope and Yancoal could see a 60% upside in their 12-month forward earnings, positioning them as leaders among coal peers. For Glencore, spot commodity prices could boost earnings by 21%, with nearly half of this coming from thermal coal. Energy trading could further enhance earnings, as companies take advantage of market dislocations in crude, LNG, and coal, a scenario previously observed during the 2022 Russia-Ukraine crisis.
Despite the recent spike in coal freight costs—Panamax rates have risen sharply—physical coal shipments have not yet shown a significant increase. High-frequency shipment data indicates that exports from key hubs like Newcastle and Samarinda remain subdued, suggesting that recent price and freight movements are more reflective of precautionary buying, logistics disruptions, or vessel shortages than actual increases in coal exports. However, given the short shipping times from Australia and Indonesia to Northeast Asia, any sustained shift towards coal could lead to increased loading activity within a few weeks as procurement decisions make their way through the supply chain. Still, higher bunker (fuel) costs may slow down the freight market and further tighten vessel availability.
For the freight rally to drive continued upward pressure on coal prices, Olsha notes that there would need to be clear signs of stronger physical demand, such as more vessels queuing at ports, rising coal imports into key Asian markets, and utilities stepping up spot procurement in response to persistently high LNG prices.
While the Asian market response is crucial, developments in Europe are increasingly relevant, especially as LNG disruptions ripple through global supply chains and influence regional fuel switching strategies.
Bloomberg Intelligence reports that gas-to-coal switching is becoming more financially attractive in both Asia and Europe. The disruption to Qatari LNG supply has sharply raised spot LNG prices and widened regional price differences, incentivising utilities in various regions to consider switching from gas to coal. However, the extent of this response will be uneven. Price-sensitive South Asian buyers have already begun to reduce gas demand or switch to alternative fuels, while North Asian markets such as Japan and Korea are likely to adjust more slowly due to long-term LNG contracts and operational restrictions.
At the same time, Asia’s need to secure replacement LNG cargoes could divert supplies away from Europe, tightening the Atlantic basin where pipeline supply is limited. This scenario could prompt more coal switching in Europe as well. If the LNG supply disruption is brief, prices are expected to stabilise. However, a prolonged outage would likely result in increased coal use across both regions.
The ongoing volatility in coal and LNG markets, fuelled by geopolitical tensions and supply disruptions, underscores the importance for stakeholders—including investors, utilities, and policymakers—to closely track freight trends, spot procurement activity, and regulatory developments. While immediate price spikes and earnings boosts are possible, especially for miners with high exposure to spot markets, the longer-term outlook will depend on how quickly supply chains adapt and whether policy responses facilitate further fuel switching. Monitoring evolving freight costs, vessel availability, and the parity gap between gas and coal generation will be critical for making informed decisions in this dynamic environment.