Material Insights · Understanding the Material World

Coking coal and Thermal coal

Coking and thermal coal come from the same basins and sometimes the same mines, and the lower grades of metallurgical coal (semi-soft and PCI) can be sold either to steelmakers or to power stations. That makes the price gap between the two the thing to watch: it normally favours coking coal, but it inverted in mid-2022 and miners switched coal to the thermal market.

Coking coal (energy) and Thermal coal (energy): 4 relationships.

How they are linked

1. Semi-soft and PCI bridge the two

Substitution · Medium · Lower-grade met coal can be sold as thermal coal

Semi-soft coking coal and coal for pulverised coal injection (PCI) need less coking strength than hard coking coal, so they overlap in quality with high-grade thermal coal and can move between markets.

  • USD 218.7/t average of 2026 forecasts, hard coking coal (surveyed March to April 2026)
  • USD 146.2/t average of 2026 forecasts, semi-soft coking coal
  • USD 121.9/t average of 2026 forecasts, Newcastle thermal coal

The forecasts form a quality ladder, with low-volatile PCI at about USD 154 a tonne between hard coking and semi-soft. Hard coking coal has no thermal substitute in the coke oven, so the overlap is limited to the lower rungs.

Sources: KPMG Australia

2. The spread can invert

Cost and price · Asymmetric · Both ways

When thermal coal gets scarce relative to steel demand, the usual premium for coking coal can vanish and miners send swing coal to power stations.

  • about 2x thermal coal price relative to premium hard coking coal, mid-2022

From early June 2022 Australian hard coking and PCI prices fell below high-grade Newcastle thermal coal, a reversal of the usual order in which premium coking coal often fetched about twice the thermal price. In 2026 shocks moved both: safety inspections after a mine accident in China in May lifted prices, particularly for coking coal.

Sources: Argus Media; IEA

3. Same basins, same mines

Joint production · Medium · Both ways

Coal rank varies within a basin and even within a seam, so many mines produce both a metallurgical and a thermal product and choose how much to wash.

  • about 213 Mt and 150 Mt Australian thermal and metallurgical coal exports, 2025-26 estimate
  • 92 Mt and 80 Mt Australian thermal and metallurgical coal exports, January to June 2022

Whitehaven, which mines both types in New South Wales, said in 2022 that the state's miners had switched out of semi-soft into thermal coal for months, except where contracts made that hard. Argus noted that even at price parity, selling unwashed coal as thermal can earn a bigger margin than washing it to coking quality.

Sources: Argus Media; Australian Government, Office of the Chief Economist

4. Seaborne trade and India's imports

Geography and ownership · High in India · Both ways

Both coals are traded by sea from a few exporters, and India is a large buyer of both, so the same freight, currency and supply shocks reach Indian power plants and steel mills.

  • 1,111 Mt and 357 Mt expected thermal and met coal trade in 2025
  • about 71 Mt India's metallurgical coal imports in 2023, including nearly 15 Mt of PCI
  • over 90% India's import dependence for coking coal, 2023

Australia supplied 48% of India's met coal imports in 2023, down from over 54% in 2022, and Indian met coal imports were still rising in early 2026 with steel output. India's own coking coal carries 30 to 50% ash, and NITI Aayog has noted that some of it ends up sold to power plants rather than used by steelmakers.

Sources: IEA; BigMint; NITI Aayog; Australian Government, Office of the Chief Economist

For investors

Key learnings

  1. The coking to thermal price spread decides where swing coal goes, so a narrowing spread signals more semi-soft and PCI moving into power markets.
  2. Mines with both products carry an option to switch, which cushions them when one market weakens, as New South Wales miners showed in 2022.
  3. Hard coking coal has no thermal substitute, so its premium is set by steel demand and supply from a few exporting basins rather than by power markets.

What to track

  • Hard coking coal less Newcastle thermal price: A narrowing or negative spread signals switching from met to thermal sales (Daily · Platts, Argus, globalCOAL)
  • Australian export mix, thermal versus metallurgical: Shows whether producers are shifting tonnes between markets (Monthly · Australian Bureau of Statistics)
  • PCI and semi-soft discounts to hard coking coal: Wider discounts make substitution into blast furnaces more attractive (Weekly · price reporting agencies)

For policymakers

Key learnings

  1. India imports over 90% of its coking coal, so blast furnace expansion deepens exposure to a few exporters in a way that thermal coal, mostly mined at home, does not.
  2. Washing more domestic coking coal for steel, instead of burning it in power plants, is a direct lever to cut coking coal imports.
  3. PCI lets blast furnaces replace some coke with cheaper coal, so wider PCI sourcing eases but does not remove India's dependence on imported metallurgical coal.

What to track

  • India's coking coal and PCI imports by country: Rising concentration flags supply risk for steel (Monthly · Ministry of Commerce trade data, Australian Office of the Chief Economist (quarterly))
  • Domestic washed coking coal output: Higher output reduces import needs (Annual · Ministry of Coal, Coal India)

India

India mines most of its thermal coal but imports over 90% of its coking coal, about 71 Mt of metallurgical coal in 2023 with Australia the largest supplier, so the two coals carry very different security risks for India.

Sources

  1. Coal price and FX market forecasts, March/April 2026, KPMG Australia (2026)
  2. Met coal discounts spur Australian switch to thermal, Argus Media (2022)
  3. Coal 2025: Trade, IEA (2025)
  4. India's met coal imports rise marginally in CY23 amid higher domestic production, BigMint (2024)
  5. Coal Mid-Year Update 2026: Overview, IEA (2026)
  6. This Coke Ain't No Cool, NITI Aayog
  7. Resources and Energy Quarterly, June 2026, Australian Government, Office of the Chief Economist (2026)