Global shipments of thermal coal - used for power generation - climbed to their highest levels since late 2024 in August on the back of strong import orders by China, Japan and South Korea.
The jump in coal purchases came after nine straight months of year-over-year declines in monthly coal exports, which had raised expectations that 2025 may mark the first full-year contraction in global coal trade since 2020.
A combination of reduced domestic coal production in China - the world's top coal consumer - as well as higher factory activity across East Asia in recent months sparked the higher regional coal import interest.
Going forward, continued restrictions on coal mining in China alongside higher demand for power heading into winter could trigger a sustained climb in overall coal imports for the rest of 2025, dashing hopes for an annual fall in coal flows.
That said, a fresh downturn in manufacturing activity combined with mild temperatures across Asia heading into 2026 could curb overall coal usage and imports, and keep full-year coal export volumes on course for a fall in 2025.
Below are some of the key data points coal traders will need to track to see if the recent upturn in imports marks a reversal in the months-long weakening trend or is just a brief blip in the ongoing contraction in global coal export volumes.
KEY MARKETS
Total thermal coal exports in August were 85.34 million metric tons, according to data from Kpler, which marked the first monthly reading above 81 million tons since last December.
August's total marked a 6.4 million ton rise from the month before and means that global shipments of thermal coal increased for two consecutive months following regular bouts of month-on-month reductions since late 2024.
The August reading was also the first monthly expansion compared to the same month the year before since October 2024, and so could have a significant impact on market sentiment if additional gains in import volumes are recorded going forward.
China, South Korea and Japan were the main drivers of the global expansion in coal imports in August compared to the month before.
China (up 5.3 million tons), Japan (up 0.6 million tons) and South Korea (up 1.8 million tons) increased their collective purchases by 7.6 million tons to 47.9 million tons in August, Kpler data shows.
The total combined monthly purchases by China, South Korea and Japan marked a 19% rise in collective imports from the month before, and led to a tightening in regional coal markets.
Average coal export prices from Newcastle, Australia climbed to five-month highs of around $111 per ton in August, compared to around $106 during June and July, data from LSEG shows.
KEY INDICATORS
Traders looking to track overall coal import potential going forward will need to closely follow coal mine production trends in China, where an ongoing pushback against overcapacity has led to cuts in coal mine output since July.
Coal market trackers will also need to track the state of China's mammoth industrial economy for a gauge on overall energy and coal needs.
Continued expansions of factory activity will likely feed through to the wider industrial economy, and trigger greater consumption of coal and other energy products as well as higher output of key ingredients used by factories.
Heightened industrial activity in China would also likely spill over into the economies of Japan and South Korea, which have tightly linked supply chains and order flows for goods and parts.
Finally, weather conditions across East Asia over the final months of 2025 will also play a major role in regional coal import appetite.
Currently, forecasts through early 2026 call for average temperatures in Japan, South Korea and China to hold slightly above long-term averages, which in turn should result in below-normal demand for heating.
However, those forecasts are likely to change considerably as the traditionally coldest months of the year approach, and will likely lead to higher expected coal demand if extended cold snaps are called for.
Historically, coal-fired power generation in East Asia hits annual highs around November and December when cold weather prompts higher demand for heating.
Utilities usually boost inventory levels accordingly, but may struggle to do so in China this year given the caps on mine production.
If curbs on fresh mine output persist this winter, power firms will likely boost their imports of coal to fulfil their inventory needs, which may help sustain the recent upside momentum in global coal orders.
Greater potential competition for coal with China may spur buyers in Japan, South Korea and elsewhere to also increase coal import orders, potentially lifting overall coal orders even higher.
The opinions expressed here are those of the author, a columnist for Reuters.
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