Investing.com --Global coal supply is struggling to keep pace with rising Asian demand as production constraints and higher natural gas prices tighten the market, potentially pushing thermal coal prices higher this winter, according to Bank of America (BofA) analysts.
Benchmark Australian Newcastle thermal coal prices have surged 40% this year to around $150 per metric ton, their highest level in two years, supported by stronger consumption and limited seaborne supplies.
BofA expects prices to remain supported through winter as elevated natural gas costs encourage power producers to switch to coal, particularly across Asia.
The Middle East conflict has tightened liquefied natural gas supplies, pushing Asian JKM prices above $30 per million British thermal units and European TTF prices beyond €90 per megawatt-hour this month.
At current gas prices, BofA estimates Newcastle coal could reach more than $350 per ton before losing its cost advantage over natural gas, suggesting considerable room for coal prices to rise.
South Korea has led recent demand growth, alongside emerging Asian economies including Vietnam and Pakistan, where higher energy costs have strengthened coal's appeal.
Supply pressures are also mounting in China and India, the world's largest coal consumers.
China's stricter oversight of mine safety and excessive production has constrained domestic output growth as utilities prepare for winter.
In India, weaker-than-expected production and sustained power generation have depleted inventories, with power plant coal stocks falling more than 60% from their March peak.
BofA expects restocking in both countries to support import demand over the coming months.
Meanwhile, Indonesian coal exports have declined following government production cuts and drought-related disruptions to coal transportation.
Russian shipments remain restricted by financial and logistical challenges, with vessel attacks effectively halting exports from Azov and Black Sea ports.
Increased shipments from Australia, the U.S., South Africa, and Colombia have partly offset these shortfalls, but BofA warned that limited spare export capacity leaves global coal markets vulnerable to further supply disruptions.
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