Interpreting the Guidance of Import Coal Price Spreads on Domestic Coking Coal Price Volatility (Part 1)

Key point: The price spread between Australian coal and Mongolian coal can roughly gauge future domestic refining. Coking Coal Market Volatility and the spread move in the same direction, with the spread leading volatility by about 2-3 months.

Based on a review of data from 2023 to the present, the factors influencing the price spread between Australian coal and Mongolian coal can be summarized as follows:

1. Fundamental trend changes in Mongolian coal and Australian coal

2. Sudden impact from macroeconomic or industry policies

3. Changes in coking coal demand in the domestic market

Judging the domestic situation in 2026 Coking coal market price Volatility can be used to analyze the direction of changes in the price spread between Australian coal and Mongolian coal. Based on policy expectations, domestic market demand, and the direction of fundamental changes in Mongolian coal and Australian coal, Expected Mongolian coal and Australian coal Import profit With improvements across the board, the impact or weight of continued surges in Mongolian coal may become even greater, thereby driving domestic refining. Coking coal price Volatility is showing a slight expansion trend.

This article is divided into two parts. The first part primarily explains the key logic behind changes in price spreads and volatility, while the second part focuses on data analysis and provides forecasts regarding future developments in the imported coal market and domestic price fluctuations.

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1. Why can Mongolian coal and Australian coal serve as reference points for the lower and upper limits of domestic coal prices?

(1) The quality endowment of Mongolian coal limits its price ceiling.

Mongolia Coking coal Its advantages lie in its low sulfur and low ash content, while its disadvantages include high volatile matter and relatively low thermal reactivity. Compared to the coking coal varieties from Shanxi’s main production areas and those from Australia, Mongolian coal generally has slightly lower quality. Therefore, in actual blast furnace operations, it must be used in combination with high-quality prime coking coal from Shanxi or Australia, and its proportion should not be too high; otherwise, it could have adverse effects. Coke Product strength. Therefore, generally speaking, Mongolian coal will only see demand if it offers a certain price advantage over Shanxi coal and Australian coal. Moreover, since Mongolian coal is primarily mined in open-pit operations and benefits from low transportation costs, its price tends to be relatively low among mainstream countries' coking coal varieties.

  (2) The diversification of Australian coal demand is lifting its price floor.

Starting from the end of 2020, China has imposed restrictions on Australia. Coal imports There has been a significant decline, and although recovery began in 2023, the structure of demand for Australian coal has undergone a fundamental shift. Taking the 2024 data as an example, Australia’s exports of coking coal to China reached 10 million tons, whereas during the same period, its exports to markets such as India (38 million tons) and Japan (35.8 million tons) far exceeded those to China. By contrast, demand for Mongolian coal is almost entirely concentrated in China; therefore, any marginal change in domestic demand has a greater impact on the overall price of Mongolian coal.

The high degree of demand dispersion gives it relatively strong bargaining power. Moreover, considering that other overseas steel-producing countries generally have rigid demand for Australian coal, the pricing of Australian coal is typically higher than that of domestic coal varieties.

(3) The structure of China’s coking coal imports is becoming more stable, and domestic and international coal prices are dynamically adjusting in line with the domestic central price.

To meet domestic market demand, China’s current coking coal supply model—combining domestically produced coal with imports—is now well-established. Both the annual import volume and the countries of origin have become relatively stable. A structure has emerged in which imports account for 20% of total supply, with Mongolian coal imports forming the main component, supplemented by imports from regions such as Russia and Australia.

According to data from January to November 2025, monthly imports of Mongolian coal continue to account for 50% to 60%, while monthly imports from Australia remain below 10%. Under this structure, Mongolian coal, to a certain extent, represents a portion of domestic production. and in March 2025, the Mongolian Exchange will implement... Coal New regulations on export prices, The requirement is to conduct transactions via online auction through the exchange. Coal exports (Includes Power coal Introduce an indexed pricing mechanism for coking coal. Coal pricing will be based on reference to six major indices, including primarily the CCI Ganqimaodu raw coal (accounting for 20%) and CR. Coking Coal Composite Index (30%), the index of CR’s premium coking coal production location (25%), and the price of raw coal for Liu Lin No. 4 coke (10%), among others, leading to... The correlation between the prices of Mongolian coal and domestically produced coal has significantly increased.

And Australian coal represents the marginal increase in China's coking coal supply. After Australian coal imports were resumed, this portion of the import volume is currently... It primarily varies based on the strength of domestic demand and market expectations. Meanwhile, given that domestic prime coking coal resources remain scarce, even though Australian coal resources are relatively expensive, they still maintain a certain level of procurement demand. For example, since coal prices in general are higher than those of domestic prime coking coal, under conditions where domestic coal production remains stable, when demand from downstream domestic enterprises improves and drives up coal prices, domestic coal prices will gradually approach Australian coal prices. This, in turn, will lead to a marginal increase in market purchases of Australian coal, thereby boosting overall supply and, conversely, putting downward pressure on domestic coal prices. The reverse is also true.

In summary, based on the current pattern of coal imports and historical price trends, we have concluded that the high and low points of domestic coal prices correspond respectively to Australian coal and Mongolian coal.

II. Forecasting Domestic Coal Price Volatility by Analyzing the Price Spread Between Australian and Mongolian Coal

Based on the above conclusions, the fluctuation range and direction of domestic coal prices generally fall within the price range formed by Australian coal and Mongolian coal. However, due to the relatively high frequency of price spread changes, it is difficult to accurately predict the absolute prices of coking coal in the domestic market. Therefore, we proceed by... Construct a data model based on the “imported coal price spread – domestic coal volatility” relationship. Furthermore, by drawing on historical experience regarding changes in coking coal prices, we can analyze the factors influencing the price spread between Australian coal and Mongolian coal, thereby enabling us to... To roughly gauge the general direction and volatility of future domestic coking coal market prices.

First, Volatility in coking coal prices has increased. The implication is that the price of coking coal has undergone a significant reversal compared to its previous trend, namely... A price inflection point has emerged. So, based on “The price spread between Australian coal and Mongolian coal widens—> Volatility in the domestic coking coal market rises.” This predictive logic has two implications:

·First, after the market rapidly reacts to a specific driving factor, does the market’s performance over the subsequent period remain consistent with its initial expectations regarding that driver? Or have those expectations been dashed or proven wrong?

·Second, after the market rapidly reacts to a specific driving factor, will a sudden new variable emerge in the near future to reverse the initial market expectations?

Based on the logic outlined above, we reviewed the historical trends in price spreads and volatility from 2023 to the present and found that each instance of a significant widening in the price spread between Australian coal and Mongolian coal was subsequently accompanied by a rise in volatility in the domestic coking coal market. Moreover, there were three particularly notable market episodes during which, following an expansion in the price spread, the domestic coking coal market price experienced a clear inflection point. Furthermore, the period from the widening of the price spread to the subsequent rise in volatility typically takes about 60 trading days—roughly 2 to 3 months—consistent with the market’s need to allow time for expectations to be validated.

We conducted a detailed analysis of the three relatively significant periods since 2023 during which the volatility of coking coal prices has risen, and summarized the key factors influencing the import coal price spread as follows:

1. Fundamental trend changes in Mongolian coal and Australian coal

2. Sudden impact from macro or industry policies

3. Changes in coking coal demand in the domestic market

Specifically, the main driving factors behind each market rally are as follows:

(1) January–May 2023:

Main reason for the widening price spread: At the end of 2022, imported coal volumes generally declined, and the favorable supply-demand structure led to a rapid increase in prices—particularly for Australian coal, which remained relatively high-priced.

The main reason for the increased volatility in coking coal prices: In 2023, after the suspension on Australian coal imports was lifted, Australian coal imports began to resume, with a noticeable increase expected. Previously, domestic coal prices had been close to those of Australian coal, and as Australian coal became available again, domestic coal prices quickly followed suit and fell sharply.

(2) January-April 2024:

Main reason for the widening price spread: At the end of 2023 and the beginning of 2024, coal throughput through Mongolia and port inventories reached historic highs at the time, continuously putting downward pressure on prices. At the end of 2023, macroeconomic policies drove a general rise in commodity prices, with Australian coal and domestic coal prices increasing at a faster pace than Mongolian coal prices.

The main reason for the increased volatility in coking coal prices: The expectation of reduced production triggered by domestic coal mine safety inspections is gradually proving to be unfounded, and domestic coal prices, along with Australian coal prices, are falling rapidly.

(3) June–September 2025:

Main reason for the widening price spread: Since the beginning of 2025, actual demand for coking coal has weakened. Coupled with issues such as Trump’s tariffs, market expectations have been weighed down, causing domestic coal and Mongolian coal prices to continue declining and reach historic lows. Meanwhile, demand for Australian coal was already weak to begin with, and given that Australian coal benefits from overseas demand support, its price decline has been relatively limited.

The main reason for the increased volatility in coking coal prices: Domestic Anti-involution policy The introduction of measures to boost market confidence, coupled with the increasing reduction in domestic coal mine production, has helped improve the fundamental oversupply situation, leading to a rebound in domestic coking coal prices after they had fallen excessively.

III. Future Outlook

Looking ahead to the coking coal market in 2026, and after analyzing the key factors influencing the Australia-Mongolia price spread, we believe that next year the domestic coking coal price fluctuations may slightly widen.

First, the price inflection point triggered by policy signals has already occurred in 2025. In June 2025, the market price of coking coal has already... Anti-involution policy Under the influence of signals, a clear inflection point has emerged, marking a rebound after the previous decline. Despite the possibility that domestic steel demand may remain relatively weak, we believe that coal industry policies will likely continue to focus on the safe and orderly release of production capacity, thereby avoiding “involutionary” competition that could lead to another irrational drop in coal prices. Some coal enterprises may also adjust their operational strategies in response to market conditions, aligning production with sales to help ensure a rational release of industry supply. However, no new policy-driven developments are expected in the near term, and thus there will be no new significant drivers for prices or for the price spread between Australian coal and Mongolian coal.

Second, analyze future price spread changes by examining the trend shifts in the fundamentals of Mongolian coal and Australian coal. It can be broken down and analyzed separately as import profits, namely: “Australian coal-Mongolian coal price spread” = (domestic price - Mongolian coal price) - (domestic price - Australian coal price).

(1) Mongolian coal:

In 2026, imports of Mongolian coal will likely continue to increase significantly. In 2025, imports declined mainly due to falling market prices; however, as customs clearance and transportation conditions at China-Mongolia border crossings further improve, and Mongolia continues to signal its intention to accelerate coal exports to China, Coal imports from Mongolia in 2026 will likely increase compared to 2025.

Consider The increase in Mongolian coal production is primarily concentrated on coking coal and thermal coal. We expect that the impact on high-quality coals such as domestic prime coking coal may be relatively limited. Moreover, domestic resources of low-sulfur prime coking coal are becoming increasingly scarce; therefore, the import profit margin between Mongolian coal and domestic low-sulfur prime coking coal may slightly widen. Given that imports of Mongolian coal account for more than 50% of total coking coal imports, and... It is more closely tied to changes in domestic market demand than Australian coal, so its price fluctuations may be greater than those of Australian coal.

(2) Australian coal:

The primary factor driving the widening price spread between Australia and Mongolia in 2025—the significant decline in profits from Australian coal imports—is the oversupply in the domestic market, which has led to an overreaction in coal prices. However, through... Anti-involution policy With the current coal price center of gravity having risen, the probability of prices continuing to fall sharply in 2026 is low. Therefore, the average profit margin from Australian coal imports will likely not be lower than that in 2025.

In addition, according to the latest forecast by Australia’s Department of Industry, Science and Resources, Australia’s coal exports could reach 343 million tons in 2026, an increase of 240.9 million tons compared to 2025. Given that some coal mines previously shut down due to accidents are gradually resuming production, we expect Australia’s coal supply to recover somewhat. However, for China, Australian coal represents only a marginal increase in imports, and India has substantial rigid demand. Therefore, even if the supply of Australian coal becomes more abundant, the rise in import profits may be smaller than that for Mongolian coal.

Therefore, based on current factors, both the import profits from Mongolian coal and Australian coal are likely to increase in the future. Moreover, the continued surge in Mongolian coal imports may have an even greater impact and weight on the market, thereby leading to domestic... Coking coal price Volatility is showing a slight expansion trend.