FX.co ★ Coal Hovers Near 5-Month High

Newcastle coal futures reached $111 per tonne in July, marking one of the highest levels since February. This increase was primarily due to a temporary surge in purchasing by Chinese power plants, which helped counterbalance an increasingly oversupplied market. It was reported that the Chinese government instructed plants to boost their coal reserves by 10%. This strategic move was designed to leverage lower prices and mitigate further impacts on producer deflation. Earlier data revealed a 4.7% annual decline in Chinese fossil-fuel power output during the first quarter, attributed to reduced power demand alongside strong contributions from renewable energy sources. Meanwhile, domestic coal production in China saw a year-on-year increase of 4% in May, supporting earlier government signals to escalate production by 1.5%, targeting 4.82 billion tons for the year, following a record-breaking output in 2024. However, potential reinstatement of tariffs on coal imports to South Korea and Japan has clouded the prospects for exporters of high-grade thermal coal, typically dispatched from the Newcastle port.