Overview
Morgan Stanley reports that seaborne thermal coal prices are on the rise as heightened tensions around Iran and the Gulf push Asian power utilities to substitute coal for natural gas generation. The bank links the shift to higher energy costs and vulnerability in global crude and LNG shipping routes.
Regional exposure and fuel flows
The bank notes that the Strait of Hormuz is responsible for 20-30% of global seaborne crude oil shipments, a concentration that has contributed to upward pressure on energy prices amid the conflict in Iran and surrounding Gulf waters. In terms of liquefied natural gas (LNG) supply, Morgan Stanley highlights that Qatari LNG accounts for roughly 60% of the supply mix to South Asia and about 15% of LNG supply to Northeast Asia.
Coal demand estimates
With spot LNG prices elevated, Asian utilities have been increasing coal-fired generation to limit exposure to costly natural gas. Morgan Stanley estimates that, if Qatari LNG exports were disrupted, Japan, Korea and Taiwan could collectively require an additional 1.5-2 million tons of thermal coal imports per month. The bank quantifies that as an 8-10% increase in coal import demand for those markets.
For South Asia, the bank projects that utilities there could add approximately 1-1.5 million tons per month of extra seaborne coal import demand if a Qatari outage persists for multiple months.
China and price dynamics
Morgan Stanley expects Chinese domestic coal prices to trend higher year-over-year. The bank says that chemical sector demand in China would exert limited direct effects on coal demand, and estimates that incremental coal volumes arising from the scenario would represent about 1.3% of China’s total effective thermal supply under extreme cases. Morgan Stanley also notes that higher import prices can act as a buffer to domestic price floors.
Australian fuel reserves and mining implications
Australia is reported to hold 36 days of petrol supply, 29 days of jet fuel and 32 days of diesel, and will open its fuel reserves for the first time since 2022, according to ABC news. Morgan Stanley warns that if tensions are extended, diesel supply used in Australian coal mine operations could be affected, a development that would further stimulate seaborne coal prices and could benefit Chinese coal producers.
Concluding note
The bank’s analysis links maritime and LNG supply vulnerabilities to a measurable increase in seaborne thermal coal demand in several Asian markets, with knock-on effects for domestic prices in China and fuel-dependent mining operations in Australia.