Fitch Solutions’ BMI Country Risk and Industry Research unit has announced that it has increased its 2026 price forecast for Australian premium low-volatile hard coking coal to $210/mt, up from $190/mt previously. The revision reflects persistent supply-side cost pressures even as the demand outlook weakens.
In the near term, prices are supported by restocking activity in China ahead of the May Day holiday. However, the market is expected to soften in May-June due to seasonal factors and the easing of cyclone-related disruptions in Australia, though prices are still projected to remain above $200/mt.
Diesel costs drive supply constraints
A major factor behind elevated prices is high diesel costs, particularly affecting Mongolian exports.
Mongolia, China’s largest coking coal supplier with exports reaching 60 million mt in 2025, relies heavily on road transport using diesel imported from Russia. Fuel accounts for 20-30 percent of total costs, limiting trucking volumes and pushing up delivered prices.
Alternative suppliers gain ground
Higher costs for Mongolian coal are expected to benefit alternative suppliers such as Australia and Russia.
Russia is expanding export capacity through rail infrastructure linked to the Elga coal mine, although its impact on Australian premium coal is expected to be limited due to quality differences.
China demand outlook weak, while India remains key growth driver
On the demand side, China’s crude steel production is forecast to decline by four percent year on year to 922 million mt in 2026. The decline is attributed to capacity cuts, weaker export demand, and broader economic uncertainty.
In contrast, India continues to support global demand, with crude steel output projected to rise by 9.3 percent to 180 million mt in 2026. Indian buyers are expected to increasingly shift toward lower-cost suppliers such as Mozambique, while seasonal factors like the monsoon are likely to support import demand.
Long-term outlook remains constructive
BMI maintains a relatively positive long-term outlook for coking coal compared to other bulk commodities. The steel sector is expected to remain structurally dependent on coking coal, particularly in India, where new capacity additions continue to rely on blast furnace technology.
Despite the upward price revision, downside risks persist. A prolonged Middle East conflict could weaken global economic growth, reduce steel demand, and place downward pressure on coking coal prices.
