Two Major Drivers Behind the Rally
1. Rising Oil Prices Amid Geopolitical Tensions
On the same day, global oil prices surged following a new series of attacks involving the United States and Iran.
West Texas Intermediate (WTI) crude oil rose 2.41% to US$96.02 per barrel, while Brent crude gained 1.89% to US$97.81 per barrel.
Higher oil prices have also supported coal prices, as both commodities can serve as substitute energy sources. When oil becomes more expensive, demand for coal as an alternative fuel source tends to increase.
2. Coking Coal Supply Disruptions in China
The second and more structural factor comes from China.
A fatal mining accident in Shanxi Province claimed the lives of 82 workers and triggered extensive safety inspections across hundreds of coal mines nationwide. As a result, many operations were temporarily suspended, significantly tightening the supply of coking coal.
At the same time, demand from China's steel sector remains robust. The country's hot metal production has reached its highest level since October last year, increasing the need for key raw materials such as coking coal ahead of the summer peak energy consumption season.
Consequently, coking coal futures on the Dalian Commodity Exchange have risen sharply.
The Other Side of the Story: Thermal Coal Faces Pressure
Interestingly, not all coal segments are benefiting from the rally.
Thermal coal prices continue to face pressure as China's domestic production remains high, while inventories at ports and power plants continue to accumulate. Electricity demand has not yet been strong enough to absorb the excess supply.
This situation reflects the consequences of China's energy security policies introduced after the power shortages experienced several years ago. Measures aimed at boosting domestic coal production have now created a market paradox: oversupply in some coal segments and shortages in others, depending on the type of coal.
Coal imports into China have also started to weaken as buyers increasingly favor more affordable domestic supplies. As a result, thermal coal prices at the mine level have lost upward momentum.
Source: Refinitiv, CNBC Indonesia (June 4, 2026)
