China’s thermal coal prices have risen to their highest level in three years amid slowing domestic production growth and supply disruptions from Indonesia, a major coal exporter to the country. The increase has also coincided with a broader energy price rally triggered by the United States-Iran war. 

The China Coal Transportation and Distribution Association said the benchmark price of coal for power generation reached CNY 1,004 (USD 150) per tonne on Monday. This was the first time the price had exceeded CNY 1,000 in two years. 

Bloomberg noted that coal remains China’s primary fuel for electricity generation, accounting for around half of the country’s electricity mix, despite the rapid expansion of renewable energy development in recent years. 

Domestic production of the fossil fuel fell by more than 3% between January and August compared with the same period in 2025. The decline followed tighter safety measures after a mine collapse in Shanxi Province in May killed several people. 

China had previously relied on Shanxi to restore production to around 31 million tonnes per year by the end of the year. However, approvals for applications to reopen mines have proceeded more slowly than expected. The relevant authorities are expected to exercise caution in granting approvals ahead of a major Communist Party meeting scheduled for later this month. 

In addition to permitting delays, coal production has faced disruptions from a three-week maintenance period on a major Chinese coal transport railway, which is scheduled to continue until 26 October. The disruption is expected to keep prices elevated. 

Coal supply challenges have also been exacerbated by developments abroad. Indonesia, one of China’s main suppliers of thermal coal, has reduced coal shipments to the country following the government’s decision to limit production in an effort to support prices and increase state revenue. 

Recently, drought associated with El Niño weather patterns has also lowered river levels in several of Indonesia’s major coal-producing regions. This has forced barge operators to reduce the loads they transport. 

Meanwhile, China’s coal consumption typically increases during the winter months, which is expected to sustain upward pressure on prices. 

An alternative fuel for power generation, liquefied natural gas (LNG), has also experienced a sharp price increase this year. The war in the Middle East has disrupted Qatari production, with supplies constrained behind the Strait of Hormuz. 

This article is published in partnership with Katadata     

Original article here