With LNG prices surging as the Middle East conflict continues and Indonesian coal production targets remain low, we discuss how high thermal coal prices might rise in 2026. In this abridged article, we consider an upside scenario for thermal coal prices if the Strait of Hormuz remains closed until at least end-2026 and the Indonesian 2026 coal production target of 600 Mt remains unchanged and strictly enforced. The full insight was published for CRU Thermal Coal Market Outlook subscribers – learn more about our service here or directly request a demo here.
A prolonged Middle East conflict would lead to LNG prices similar to 2021–2023
In this high price scenario, the effective Hormuz closure lasts until at least end-2026, driving LNG prices even higher. Under this scenario, we estimate LNG prices would reach $40 /mmBTU or ~€120 /MWh in December when demand is high.
Between January 2021 and December 2023, a $1 /mmBtu increase in the average East Asian and European LNG benchmark was associated with a $6–20 /t rise in the FOB Newcastle 6,000 kcal/kg spot assessment. If we assume the sensitivity ratio rises to a slightly conservative 5:1 as a result of ongoing, even escalating, conflict in the Middle East, this implies the scenario thermal coal price would exceed $200 /t by end-2026.
Low Indonesian coal production would massively squeeze export availability
Indonesia is, by far, the world’s largest thermal coal exporter. Those exports will be limited to a trickle in 2026 Q4 if the Indonesian government enforces its low 600 Mt target, far below its 2025 target of 740 Mt.
Indonesia’s domestic consumption and exports have been higher y/y so far in 2026. Adjusting the 2026 thermal coal Business Costs export curve to 2026 Q4 and removing all Indonesian exports illustrates the potential for a sharp tightening in the market, which would lead to a big increase in prices.
It is not possible to quantify the FOB Newcastle 6,000 kcal/kg spot price risk from the Business Costs curve directly as supply shrinks far below projected demand in the scenario. However, if we look back at price behaviour relative to costs under prior supply constrained conditions, it is clear this risk alone could lift the FOB Newcastle 6,000 kcal/kg spot assessment to well above $200 /t.
Thermal coal prices will soar if multiple risks manifest simultaneously
With a higher LNG price and little or no Indonesian exports in 2026 Q4, FOB Newcastle 6,000 kcal/kg spot will far exceed $200 /t if the multiple upside risks manifest simultaneously. There are also downside price risks to thermal coal, such as from a Super El Nino as discussed here. However, our view is that thermal coal prices would rise to the highest level since 2022 under this scenario, even if only some upside risks materialise.
Our base case price forecast, discussed in the upcoming edition of the CRU Thermal Coal Market Outlook, is more moderate. If interested, learn more about our service here or directly request a demo.
If you would like to learn more about how the Middle East conflict affects coal prices or other aspects of thermal coal markets, contact us. We will be happy to talk further about our work.
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