Indonesia thermal coal bullish into H2 2026 as El Niño tightens supply

Indonesia thermal coal is turning bullish into H2 2026 as a strong El Niño threatens exports, tightens logistics and raises the likelihood of increased import demand from India.

The El Niño forecast has firmed: 61% onset by July, 88%+ probability through the second half of 2026. Weather models point to a strong El Niño event, dubbed by media ‘Godzilla’ El Niño.

But the 2023 El Niño event is the wrong reference point.

In 2023, Indonesia entered the dry months exporting up to 43Mt of thermal coal per month. The El Niño cut Jun–Sep exports 8% y-o-y, yet full year exports still increased 13% y-o-y. The system absorbed it.

Year-to-date 2026 exports are running at under 35Mt per month 27% below the same period in 2024. A much smaller starting base.

Of the three mechanisms that absorbed supply in 2023, only one flexed:

• India bought less Indonesian coal, but only because it had a record year for its own domestic production. That mechanism is now at risk.
• River barge logistics get worse under stronger droughts, not better.
• Indonesia’s domestic supply rules push more coal onshore under stress, never less.

A strong El Niño with a positive Indian Ocean Dipole will impact Indian monsoon rainfall in the same coal belts that feed Coal India. If India can’t refill its own stocks, it will incentivise increased coal imports, supporting coal prices to be stronger through the Jun–Oct 2026 window.

Source: Commodity Insights