Market Insight
By Nikos Tagoulis, Head of Research Department
With the winter heating season underway, the thermal coal market is benefiting from strengthening demand, as elevated natural gas prices reinforce coal’s cost competitiveness in power generation.
Qatari LNG volumes remain sharply reduced, while European natural gas prices have returned to levels last seen during the 2022 energy crisis, with Dutch TTF prices recently exceeding €100/MWh and EU gas inventories below their 5-year average. These conditions have improved coal-fired generation economics, encouraging gas-to-coal switching across parts of Europe and Asia. Nevertheless, seaborne thermal coal trade is expected to remain broadly stable in 2026, as additional demand from fuel switching is largely offset by supply constraints.
Beyond this short-term supportive backdrop, the broader outlook remains uncertain. China's seaborne thermal coal imports are forecast to decline, pressured by elevated international prices and expectations of recovering domestic production. Although mine inspections and safety restrictions have constrained output in recent months, government directives to accelerate mining activity in Shanxi, which accounts for approximately 30% of Chinese coal production, point to improving domestic availability. Together with expanding renewable generation, this could further reduce China's import requirements in 2027, while Japan and South Korea may also face longer-term demand slowdowns amid continued decarbonization efforts. Meanwhile, India and ASEAN economies, particularly Vietnam and the Philippines, remain drivers of coal consumption growth, supported by rising electricity demand and industrial activity. In India, weaker hydropower generation amid El Niño-linked monsoon shortfalls, increased industrial demand and restocking have supported seaborne imports, although government efforts to expand domestic coal production aim to reduce reliance on imported supplies.
On the supply side, Indonesia, the world’s largest thermal coal exporter, continues to face constraints. Although production quotas were revised upwards in October, approved output remains well below last year’s levels. At the same time, domestic market obligations require miners to prioritise local supply, leaving fewer tons for export. Supply has been further squeezed by El Niño-driven low river levels in Central Kalimantan, which have limited barge movements to terminals, tightening export availability. Australia, which together with Indonesia accounts for close to 70% of global thermal coal exports, is expected to record broadly flat volumes, with limited upside as its traditional North Asian buyers are set to reduce imports over the medium term.
As these conditions create opportunities for alternative suppliers, Colombia is strengthening its position in the Atlantic thermal coal market, benefiting from renewed European demand amid elevated natural gas prices. According to LSEG, European thermal coal imports surged 79% y-o-y in October, while cumulative imports rose 31% during January–October. Over the same ten-month period, Colombian shipments to Europe increased 46%, maintaining a market share of around 60% and underscoring the country's importance as a key coal supplier.
Overall, Colombian thermal coal exports increased by approximately 11% during January-October and are poised for further growth of around 8% in 2027, although their geographical distribution has shifted. Weaker Asian demand has been offset by stronger purchases from European and regional Atlantic buyers. Mexico has emerged as a key destination, alongside growing demand from Central American and Caribbean markets, while firmer Indonesian prices have improved Colombian coal's competitiveness. For dry bulk shipping, however, the benefits of expanding Colombian exports are somewhat tempered by evolving trade patterns. While higher shipment volumes support cargo demand, the increasing orientation towards Atlantic Basin destinations reduces average sailing distances compared with Asian routes, potentially constraining ton-mile growth relative to physical trade expansion.
Furthermore, following last August’s change in administration, Colombia has adopted a more supportive stance towards the coal sector, reopening export channel to Israel by lifting the previous government’s ban and signalling renewed support for exploration and mining investment. Nevertheless, significant operational risks persist. Repeated attacks on the railway linking the Cerrejón mine to its coastal export terminal, including a derailment in late September, alongside recurring community blockades, continue to threaten the reliability of coal shipments.
Despite these logistical and security challenges, Colombia is poised to expand its footprint in global coal exports, benefiting from favourable gas-to-coal economics, a near-term shift in energy demand towards coal and uncertainty surrounding Indonesian shipments, while a more conducive domestic policy environment helps it capitalize on emerging export opportunities.
Tanker Chartering
The crude tanker spot market showed diverging trends over the week, with VLCCs staging a recovery while the other tanker classes suffered losses. Against this backdrop, the BDTI averaged 7,111, down 2% w-o-w.
The VLCC segment regained much of the ground lost in recent weeks, driven by a surge in demand, particularly East of Suez, and increasingly restricted vessel availability. The Middle East led the upturn, with active fixing off Oman absorbing prompt tonnage, while speculation over potential US military action against Iran following the elections may have encouraged charterers to bring forward their requirements. In West Africa, lackluster enquiry was offset by vessels heading east, underpinning freight levels. The USG also posted gains, benefiting from healthy cargo flows and eastbound ballasting. Average TCE earnings rose by 9% on a weekly basis, to $829,398/day.
On the Suezmax side, insufficient cargo enquiry led to widespread rate declines, with competition from other tanker classes adding to the weakness in certain trades. Despite steady Mediterranean activity and some interest in CPC cargoes, TD6 retreated. In West Africa, limited fixing opportunities weighed on freight, with occasional Guyana requirements proving inadequate to reverse the trend. The Arabian Gulf showed greater resilience, buoyed by healthy activity off Fujairah, while persistent geopolitical uncertainty continued to shape owners’ employment strategies. Suezmax TCE earnings fell by 11% w-o-w to $570,090/day.
Aframax markets initially benefited from weather-related delays and limited prompt tonnage in the Mediterranean and North Sea. However, as position lists lengthened and fresh cargo enquiry remained subdued, competition among owners intensified, triggering corrections, particularly in the Med. The US Gulf remained quiet, although expectations of increased activity later in November continued to keep vessels in the region. In Asia, tepid demand and ample vessel supply kept rates under pressure. Average Aframax TCE earnings declined by 10% on the week, to $303,147/day.
Dry Chartering
Capesize spot rates extended their gains for a second consecutive week, led by a strengthening Atlantic market, as Pacific activity also gathered pace. Increased cargo demand from South Brazil and West Africa to China reduced the pool of prompt vessels, with charterers shifting their attention towards December shipments. Fresh North Atlantic enquiries provided further support, particularly on fronthaul routes. In the Pacific, greater interest in open vessels pushed rates higher despite restrained miner activity, although fixing slowed towards the close, prompting some easing in offers.
Subdued demand continued to weigh on the Kamsarmax/Panamax market, with the Atlantic bearing the brunt of the downturn. Limited cargo enquiries and a growing number of open vessels strengthened charterers’ bargaining position, leaving owners seeking scarce employment opportunities. Conditions were particularly challenging off East Coast South America, where weak demand coincided with an influx of ballasters from the Indian Ocean. The Pacific proved somewhat more resilient, with Indonesian shipments providing support, whereas a relatively short list of open vessels helped limit rate declines in the North Pacific despite sluggish trading.
Overall, Ultramax/Supramax earnings recorded modest losses last week amid divergent regional trends. Northern Asian demand sustained Pacific earnings, despite slower business in the South Pacific and declining returns in the Indian Ocean. Across the Atlantic, dwindling grain and petcoke volumes curtailed employment prospects in the US Gulf. Continental voyages continued to yield healthy returns, although freight rates for scrap shipments retreated from earlier highs. Meanwhile, chartering interest in the Mediterranean was concentrated mainly in the east.
Handysize earnings edged lower last week, despite gains in certain regional markets. Northern Pacific trades recorded modest increases, whereas the Mediterranean struggled to attract fresh chartering interest. The US Gulf weakened after midweek amid an excess of tonnage. East Coast South America proved more resilient, although slower fixing activity prevented further advances. Meanwhile, the Continent maintained its firm footing, benefiting from a relatively small pool of vessels positioned near loading ports.