commodityinsights

Asian thermal coal prices find support as import demand rebounds and supply risks rise at the same time

📌 Asia’s thermal coal market is heating up into late May, with Reuters citing Kpler data estimating regional imports at 76.26 million tons, up 23% from the previous month and above the same period last year.

🔎 China remains the key focus, with May imports estimated at 22.63 million tons, the highest level since January. This comes as domestic output in April fell sharply from the previous month, forcing the market to reassess the supply-demand balance.

⚠️ The coal mine accident in Shanxi on May 22 could lead to stricter safety inspections in China, adding short-term supply risk. This is a more important price-supportive factor than the isolated impact of geopolitical tensions.

💡 The Iran war and risks around Hormuz mainly affect coal indirectly through the LNG market. When LNG becomes more expensive or less stable, countries such as Japan and South Korea have more incentive to switch back to thermal coal to secure power demand.

📈 Indonesian 4,200 kcal/kg coal has risen to $64.43 per ton, its highest level in three years, while Australia’s Newcastle coal is around $133.09 per ton, near an 18-month high. The fact that imports are still recovering despite higher prices suggests demand is not purely speculative.

✅ In the short term, Asian thermal coal still has room to stay elevated if China keeps domestic output low, India enters a stronger power-consumption phase, and Indonesia adds more export uncertainty from July. The main risk is a quick cooling in LNG prices if tensions around Hormuz ease.

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China’s coking coal surges after Shanxi mine accident triggers supply shock

📌 China’s coking coal prices jumped sharply at the start of the week, with the most-traded Dalian contract hitting its daily limit up of nearly 8% to 1,266.5 yuan per ton, the highest level in almost two weeks. The move came after a serious accident at the Liushenyu mine in Shanxi, prompting the market to quickly reprice supply risks.

🔎 Shanxi is one of China’s key coking coal production hubs, so the temporary suspension of multiple mines for safety inspections created clear pressure on market sentiment. Market estimates suggest raw coking coal supply could fall significantly over the next few days if inspections last 3–5 days or expand to more areas.

⚠️ The impact also spread across the ferrous chain, with coke rising nearly 8%, iron ore edging higher, and both rebar and hot-rolled coil gaining more than 1%. This shows the shock is not limited to coking coal, but also affects expectations for steel production costs in China.

💡 In the short term, coking coal prices may remain volatile as the market reacts sensitively to any updates on mine safety inspections. If production resumes quickly, the rally may cool down; if inspections are extended or tightened, further upside pressure could remain.

✅ This is a typical short-term supply shock, more suitable for monitoring over the next few sessions than treating as a sustainable uptrend. The key risk is potential government intervention through higher imports, inventory releases, or price controls if volatility becomes too strong.

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Cocoa’s sharp price drop is opening the door for real chocolate to return after a period of expensive raw materials.

📌 Cocoa futures have fallen nearly 70% from their late-2024 peak, when prices once climbed above $12,000 per ton due to poor weather and crop disease in West Africa. This correction is creating a new adjustment cycle in the chocolate industry, where high input costs had previously forced many companies to change recipes and product sizes.

💡 When cocoa prices surged too far, major brands used several alternatives to protect margins, including lower cocoa content, more wafers, sugar, nuts, or other added ingredients. Some cocoa substitutes also entered the supply chain, weakening demand for natural cocoa and contributing to a market shift toward oversupply.

🔎 As prices fall sharply, the incentive is now reversing. Hershey said it will bring Hershey’s and Reese’s back to their original recipes starting next year, while other companies may consider a similar move if real cocoa remains cheaper and better aligned with consumer demand for more natural products.

⚠️ However, the impact on retail prices may not appear immediately because many companies have already locked in raw material prices and still hold older inventory. Cocoa demand also risks hitting a multi-year low if manufacturers do not increase real cocoa usage quickly enough over the next 12 months.

✅ For the market, this suggests the 2024 cocoa price bubble is now correcting itself. Lower prices could support chocolate makers’ margins, ease shrinkflation pressure, and gradually restore demand for West African cocoa, but weather risks, crop disease, and the pace of recipe changes remain key factors to watch.

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Global agricultural markets for April 27–May 2 were clearly divided, with wheat, cotton and cattle outperforming while corn, soybeans and rice stayed more cautious.

📌 Markets leaned toward selective bullishness rather than a broad rally. Wheat led the move as drought in the Southern Plains weakened US winter wheat conditions, while corn and soybeans stayed range-bound due to solid US planting progress and large South American supply.

🌾 Wheat remained the main focus, with only around 30% of the US winter wheat crop rated good to excellent. Even after late-week profit-taking, prices kept a risk premium as traders continued to watch whether dry weather would extend into May.

⛽ High energy prices supported vegetable oils and biofuel demand, helping soyoil, palm oil, canola and part of the soybean complex. Still, soybeans were capped by Brazil’s large crop, while palm oil faced pressure from weaker Malaysian exports after the holiday season.

⚠️ Fertilizer remains a key medium-term risk, as tensions around Iran and Hormuz kept urea and other input costs elevated. If prices stay high, farmers may adjust next-season planting plans, while global yield risks could increase.

🐄 Outside grains, cattle and cotton stood out. Cattle were supported by lower beef stocks and tight supply, while cotton gained from Texas drought concerns and renewed fund buying.

🔎 Rice balanced the broader picture, as high US and global inventories plus weak trade limited upside momentum. Large supply from Brazil and the Black Sea region also kept grain rallies from expanding too quickly.

✅ Next week, attention will turn to Crop Progress, US weather, urea prices, Hormuz developments and the WASDE report on May 12. If weather stays dry and fertilizer costs remain high, agricultural markets may keep a selective positive bias, though pullbacks are still possible after the recent rally.

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Global metals overview for Apr 27–May 2: industrial metals stayed firm on tighter supply, while precious metals rebounded on geopolitical risk.

📌 Global metals traded mixed this week, but the overall tone stayed positive. Thin liquidity during China’s Labor Day holiday did not erase support from low inventories, higher freight costs and supply disruptions.

🔎 Nickel was the strongest performer, with LME 3-month prices near a 22-month high. The move was driven by Indonesia’s mining quota controls, higher sulfur costs and tighter raw material supply for stainless steel production.

💡 Copper held near 13,000 USD/ton as LME/SHFE inventories stayed low, treatment charges remained negative and traders watched China’s sulfuric acid export restrictions from May. Q2 maintenance and concentrate tightness kept medium-term support intact.

⚙️ Aluminum remained supported by physical tightness, with falling LME stocks, firm backwardation and rising cancelled warrants. Middle East tensions also lifted freight costs and delayed deliveries.

⛓️ Iron ore stayed stable around 105–110 USD/ton, helped by high hot metal output in China and pre-holiday restocking. Still, high port inventories and stronger shipments from Brazil, Australia and Simandou limited upside.

🪙 Precious metals fell early as the dollar strengthened and markets waited for the FOMC decision, then rebounded as the Fed held rates while energy inflation and US–Iran/Hormuz risks stayed elevated.

⚠️ In the next 1–4 weeks, the focus will be China’s post-holiday demand, LME/SHFE inventories, copper TC trends and Hormuz developments. Stronger real demand could keep copper, nickel and aluminum elevated; otherwise, a hawkish Fed or weak China stimulus may trigger profit-taking.

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