A ‘Super’ El Niño event is now increasingly likely and is expected to have significant impacts on global climate and weather. Our analysis suggests it will impact Asia-Pacific primarily, where the traded thermal coal market is concentrated. In the latest publication of the CRU Thermal Coal Mark Outlook, we assumed a ‘normal’ El Niño event and, for illustration, here we consider the additional impacts that a ‘Super’ El Niño could cause. The following is an abbreviated version of a CRU Insight published to our subscribers last week.
More rainfall will weigh on Northeast Asia thermal coal demand
Across North Asia, ‘Super’ El Niños historically bring higher temperatures and greater rainfall in winter than normal El Niños. Higher winter temperatures generally reduce power demand and high rainfall drives stronger hydropower generation – both lead to reduced coal power generation requirements.
In China, under a ‘Super’ El Niño, there would be heavier rainfall across a wider area both along and south of the Yangtze river. Based on past instances of Super El Niño, we expect this will reduce total Chinese thermal coal demand at the national level and pressure domestic prices.
In Japan, South Korea and Taiwan, China (JKT), El Niño generally has a greater impact in winter, also bringing more rainfall and warmer temperatures. Past ‘Super’ El Niños have generally increased rainfall compared to normal El Niño years and we now expect more rainfall this winter. The impact on coal demand in South Korea and Taiwan, China will be limited, as hydropower generation accounts for a relatively small share of their power mixes. However, Japan has a higher share of hydropower in its power mix, at ~8%, and in a ‘Super’ El Niño event we assume a minor coal demand reduction below our base case over the November–February period, driven by higher hydropower generation.
Drier conditions benefit major thermal coal exporters
‘Super’ El Niño conditions have historically led to a drier-than-normal July–October seasons in Indonesia, as seen in the last ‘Super’ El Niño during 2015–2016. Drier weather can improve operational utilisation rates.
In Australia, rainfall is generally below normal during an El Niño, including in the Hunter Valley, reducing the probability of export disruptions. We assume a ‘Super’ El Niño will be even drier and/or increase the probability of dry conditions. However, rainfall can be variable – during the last Super El Niño of 2015–2016, there was unusually heavy rainfall in the winter.
Super El Niño poses a net downside risk to thermal coal prices
Compared to our current base case forecast from our July 2026 Thermal Coal Market Outlook (request a demo here), there will be weaker thermal coal demand in China and Japan during a Super El Niño winter, though this will be mitigated by some increase in India due to drier conditions there. Moreover, we assume Australian and Indonesian thermal coal exports will be mostly supported by slightly drier conditions. This will pressure thermal coal prices compared to our base case.
If you would like to know more about how climate and weather affects thermal coal markets or other aspects of thermal coal markets, contact us. We would be happy to have a discussion.
