Coal Makes a Comeback

The latest Middle East conflict has sent European gas prices soaring, reviving interest in coal as a stop‑gap fuel. With TTF gas contracts hitting record highs and LNG supplies constrained, power generators are re‑evaluating their fuel mix. Analysts note that the cost gap between gas‑fired and coal‑fired generation has narrowed dramatically, prompting a tentative swing back to hard coal in several markets. This shift underscores how geopolitical shocks can temporarily disrupt the broader energy transition narrative.

In Europe, Germany leads the resurgence, seeing coal imports rise from roughly 100,000 tonnes pre‑conflict to about 1.5 million tonnes in the next quarter. Clean dark spreads—profit margins for coal‑generated electricity—are now positive, hovering around €25‑30 per MWh (approximately $27‑$33). Italy and the Netherlands are also extending plant operations, while Poland relies on seasonal coal for combined‑heat generation. Lignite remains Germany’s cheapest baseload, but overall coal profitability remains modest until winter, when renewable output wanes and higher spreads could sustain coal use through 2026‑27.

Beyond Europe, Northeast Asian markets such as Japan, South Korea, and Taiwan are eyeing coal as LNG prices stay elevated. Global coal supplies remain ample, with exporters from the U.S., Colombia, South Africa, and Australia ready to meet incremental demand. However, the summer shoulder season may tighten markets as Asian cooling loads rise, potentially driving price spikes similar to the 2022 crisis. Analysts caution that while the current coal comeback appears driven by short‑term economics, sustained profitability will depend on the duration of gas price volatility and the pace of renewable integration.