This paper examines the structural components that characterise the price behaviour and perceived arbitrage of thermal coal delivered to India from Indonesia relative to prices from South Africa and Australia. Index coal prices favour imports of Indonesian brands however significant volumes are also imported from South Africa and Australia. The Indian energy market is characterised by homogeneous power plant technologies and coal procurement strategies which allows for seaborne coal brands to be benchmarked against a specific quality. In this study the index price of Australian, South African and Indonesian thermal coal is transformed using freight and quality adjustments to derive a measure for the expected electrical energy output known as delivered units of energy. The degree of market integration in the seaborne thermal coal market using the new price series is tested using cointegration analysis. The degree of convergence and the absolute level of arbitrage between major coal exporters is also tested using a recursive approach in the form of a Kalman filter. Using the transformation to units of energy the market is shown to be relatively integrated and the apparent arbitrage between exporters disappears when accounting for freight and coal quality differentials. This study challenges the common notion that thermal coal importers source material that has a freight price advantage and highlights the importance of coal quality differentials in power production.