China Brings Bad News for Indonesian Coal Miners, US Offers Hope

Thermal coal prices in China have fallen sharply due to abundant stockpiles and cooler-than-expected weather, dimming hopes for a summer demand surge. Power plants and market participants are not aggressively purchasing new supplies, as inventories at ports and power stations remain high, limiting restocking needs. The anticipated heatwave, which was expected to drive electricity consumption, has not materialised, reducing the use of air conditioning and keeping demand for electricity and coal lower than forecast. High domestic coal production in China has also added to the supply glut, further pressuring prices. Additionally, improved water availability for hydroelectric power plants in some regions has reduced reliance on coal-fired generation. The weakening of prices in China could potentially depress seaborne coal prices, including those from Indonesia and Australia, as China is the world’s largest coal importer. For Indonesia, this development is a negative sentiment, as China is its largest coal export market. If Chinese coal prices continue to weaken and imports slow, global benchmark coal prices and Indonesia’s export performance could be negatively affected. In contrast, positive sentiment emerged from the United States, where companies are expected to invest around US$50 billion in coal and gas-fired power plants this year, according to the International Energy Agency. This marks the first time in decades that US spending on coal and gas generation is set to surpass China’s investment in these sources, with the difference estimated at around US$3 billion. The surge in investment is primarily driven by rising demand for gas turbines amid the rapid construction of data centres. US companies ordered up to 20 gigawatts of gas turbine-based power generation capacity in the first quarter alone. Turbine prices have soared due to limited supply, with an analyst from Rystad Energy noting an increase from around US$800 per kilowatt to more than US$2,500 per kilowatt. The expansion of wind and solar power is also increasing the need for baseload generation to maintain grid stability when weather conditions are unfavourable for renewable production. Despite soaring electricity demand, gas turbine production capacity has barely increased in recent years, leading to a supply shortage. Siemens Energy reported record orders for its gas service business in February, with 102 new turbines ordered, around 40 percent from the United States and 35 percent from Europe. Mitsubishi Power, the world’s third-largest gas turbine manufacturer, announced plans last year to double its production capacity to meet the surge in demand, with its CEO stating that a 30 percent capacity increase was no longer sufficient. Meanwhile, production at India’s state-owned Coal India Ltd fell 7.5 percent to 169.6 million tonnes in the first quarter of the 2026/2027 fiscal year, despite strong demand from the power sector amid record summer electricity consumption. The company, which accounts for over 80 percent of India’s coal output, had produced 183.3 million tonnes in the same period the previous year. In June alone, production slipped 0.6 percent to 57.4 million tonnes. However, coal sales rose 7.5 percent in June to 65.8 million tonnes, and cumulative sales for the April-to-June quarter increased 3.5 percent to 197.7 million tonnes.