Thermal Coal

Thermal coal (steam coal) is burned in power stations to generate electricity and in industrial boilers for process heat. It is priced by calorific value (NAR/GAR), with 6,000 kcal/kg NAR being the benchmark specification. Indonesia, Australia, and South Africa are the largest seaborne exporters.

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6,000 kcal/kg NAR5,500 kcal/kg NAR5,000 kcal/kg NAR4,200 kcal/kg GARFOBCFRCIF
Quick Facts

Thermal Coal at a Glance

Common Origins
IndonesiaAustraliaSouth AfricaRussiaColombia
Common Destinations
ChinaIndiaJapanSouth KoreaVietnam
Grades & Specifications
6,000 kcal/kg NAR5,500 kcal/kg NAR5,000 kcal/kg NAR4,200 kcal/kg GAR
INCOTERMS
FOBCFRCIF
Unit of Measure
Metric Tons
Price Drivers

What Moves Thermal Coal Pricing

Thermal coal trades against three benchmarks: API2 (Northwest Europe CIF), Newcastle (FOB Australia), and Richards Bay (FOB South Africa). Price drivers include Chinese power burn (the single largest demand swing factor), Indian monsoon strength affecting hydroelectric output, European gas-to-coal switching economics tied to TTF, and Indonesian export quota policy (DMO obligations periodically tighten supply). Freight rates on the BCI panamax index materially affect delivered economics.

Contract Structure

How Thermal Coal Cargoes Are Priced and Settled

Standard cargoes are 50,000-75,000 tonnes panamax or 165,000-tonne capesize for India and China. Pricing is benchmark plus or minus a quality-adjusted differential, with the GAR (gross as received) basis dominant. Energy-adjusted pricing — '$/kcal' — is increasingly common on long-term Asian contracts. Letter of credit and cash-against-documents both feature.

Quality & Disputes

Thermal Coal Specifications and Dispute Practice

Specs cover calorific value (NAR or GAR kcal/kg), total moisture, ash, sulfur, and volatile matter. The penalty/bonus matrix is contractual — typical bonuses for high CV and low ash, penalties for high sulfur (>0.8%) and high ash (>15%). Independent draft survey at load and discharge is universal; weight discrepancies above 0.5% trigger reconciliation.

Trade Flows

Where Thermal Coal Comes From and Where It Goes

Indonesia is the largest seaborne exporter, primarily to China and India. Australia exports premium calorific coal to Japan, Korea, and Taiwan. South African Richards Bay coal traditionally served Europe but now mainly flows to India and Pakistan post-EU coal ban. Russian coal exports have been redirected to Asia. China imports both Indonesian sub-bituminous and Australian high-CV coal depending on relative pricing.

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More in Energy

Metallurgical Coal (Coking)

Metallurgical (coking) coal is a premium coal grade used in blast furnaces to produce coke, which serves as both fuel and a reducing agent in iron smelting. Hard coking coal (HCC) commands the highest price, with quality measured by CSR (Coke Strength after Reaction) and volatile matter content.

Steam Coal

Steam coal is an intermediate-energy coal grade used in industrial boilers, district heating plants, and smaller power stations. It bridges the gap between high-CV thermal coal and low-rank sub-bituminous coals. Pricing typically follows a discount to benchmark 6,000 kcal specifications.

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