Russell: The seaborne thermal coal markets in Asia are shrinking slowly.

In the next few years, the market for seaborne coal thermal is in a slow race as a slight decline in demand competes with?an equally mild decline in supply.

The longer-term price outlook will be largely determined by which of the two factors dips slightly faster than the other.

In recent years, Asia has dominated the seaborne trade of the coal type most commonly used for generating?electricity. Nearly 90% of all volumes have been traded.

According to data compiled by commodity analysts Kpler (?commodity analysts), the?continent's imports of seaborne goods peaked at 898.2 millions metric tons in 2020, before falling slightly to 856.3 in 2025.

The price of oil is expected to rise in 2026, as the US and Israel war on Iran has led to higher prices.

This year's CT Asia Conference, held on the Indonesian island resort of Bali and the largest coal industry meeting in the world, was marked by a picture of a moderating supply and demand.

Most coal market participants do not see this as a negative trend. They view it more positively.

According to the view, the steep rise in prices of crude oil and refined products as well as LNG due to the restricted exports from Middle East have?definitely' extended the lifespan of coal in Asia.

The world's largest exporters of thermal coal, Indonesia and Australia are the main suppliers of seaborne thermal coal. Both producers do not face shipping chokepoints like the Strait of Hormuz (in the Middle East).

The second largest suppliers to Asia are South Africa, Russia, and the United States. They suffer from higher shipping costs but are also seen as reliable producers.

The main issue on the supply-side is in Indonesia. This market is more driven by policy than it is by price and demand fundamentals.

In Indonesia, there are two important factors to consider. The first is the total amount of coal that government-authorized miners can produce.

DOMESTIC DEMAND, OUTPUT

Indonesian coal production reached a record in 2025, with 790 million tonnes. The government has now decided to cut back on exports to raise prices.

There's no way to know exactly how much coal is going to be mined in this year. However, the general consensus is that it will fall by around 60 million tons.

In off-the record conversations, representatives of the coal industry at CT Asia said that they believe the government wants to cap coal production around 700 million tonnes per year.

Second, the strong increase in demand from Indonesians for coal is a result of the continued growth of the domestic market. This is especially true within the metal processing industry.

Indonesia is the largest nickel producer in the world and is increasing capacity to produce other metals such as aluminum.

The process of turning metal ores into semirefined metals or final products requires a lot of energy. Most of that power is generated by coal.

Toby Hassall of LSEG, who is the coal research leader, presented data at the conference that showed the sales of coal to domestic consumers grew at a rate of compound annual growth of 11.1% between 2015 and 2025. These sales now account for 31 percent of the total coal demand in Indonesia.

If Indonesian coal production remains relatively stable, but the domestic market continues to grow, then there is no other option than to reduce supply.

The question is whether or not the government will take steps to maintain output, or if it will allow miner to increase production. Even if this happens, there's still a question about how much more exportable product can be produced.

The supply outlook is soft outside of Indonesia. New production in Australia has been hampered by the difficulty of obtaining permits and a shortage of capital. In South Africa, rail transport restrictions have created a problem.

CHINA POLICY

There are also some problems on the demand side. China, which is the top buyer, is largely seen as a market that is governed by policy.

Imports of coal?were lower in the first half but rebounded following a drop in domestic production amid safety inspections in response to an accident that killed 82 miners in May.

The overall trend will be to slow seaborne imports, as renewables take away coal's share of the market and domestic production increases.

India, which is the world's second largest coal importer, will likely see a decrease in seaborne coal imports as its domestic production increases, but also be more inclined to purchase coal for other industrial sectors, such as cement manufacturing.

As coal plants retire and are replaced with renewables or LNG, Japan and South Korea will also see a decline in imports.

The growth of smaller importers like Vietnam, Philippines and Bangladesh will not be enough to offset the decline in demand from the top four buyers.

Most industry players in CT Asia believed that seaborne thermal coal supplies would decline modestly, but a little faster than the drop in demand.

Prices are expected to remain relatively stable, but they may still be subject to fluctuations caused by unanticipated events such as the China mine inspections this year or weather-related shortages in Australia or Indonesia.

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These are the views of the columnist, an author for.

(source: Reuters)