Newcastle Coal Prices Drop to Four-Year Low Amid Oversupply

Newcastle coal futures declined toward $102 per tonne in February, marking their lowest level in nearly four years. The decline comes as evidence of oversupply in the global market outweighed strong demand from top consumers like China and India.

China’s Record Coal Production Adds to Supply Pressure

China, the world’s largest coal producer, announced that its coal output is set to expand by 1.5% in 2025 to 4.82 billion tons, following a record-setting production in 2024. The government aims to expand mining capacity to prevent supply shortages amid:

• Carbon emission limits
• Mine shutdowns due to safety breaches

Despite these measures, China’s utilities are already dealing with record-high coal inventories, which rose by 12% in the two months ending October, further contributing to supply pressures.

Indonesia’s Coal Boom Limits Price Upside

In addition to China, Indonesia also posted record coal production, reaching 836 million tonnes in 2024, 18% above its target. The country’s shift toward alternative energy sources has also limited the outlook for coal demand, as investments in renewable energy and gas-fired power plants increase.

Bullish Demand Not Enough to Offset Oversupply

Despite concerns over oversupply, coal consumption remains robust, especially in China, where:

• Coal plant construction rose to its highest level in a decade in 2024
• Demand is expected to increase amid retaliatory tariffs on US LNG

However, even with strong demand fundamentals, the surge in global production and inventory accumulation has pushed coal prices to multi-year lows.

Market Outlook: Will Prices Recover?

Coal prices may remain under pressure in the near term, with key factors to watch including:

• Future coal production policies in China and Indonesia
• Potential shifts in global energy demand
• New government regulations on carbon emissions

With alternative energy sources gaining momentum and global inventories at record highs, the coal market could face continued downward pressure unless supply constraints emerge in the coming months.

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