Coal news and updates

Thermal coal prices stagnate amid oversupply, weak demand

Market research firm BMI, a Fitch Solutions company, says thermal coal prices will remain stagnant owing to oversupply and weak demand.

The company maintains its Newcastle thermal coal price forecast for this year at an average of $135/t. Prices, which averaged $174/t in 2023, were around $135/t on July 20 and have averaged at $132/t in the year-to-date.

"While our forecast implies that we expect prices to remain supported over the coming months, it paints a significant departure from the yearly average of $358/t reached in 2022.

“Since the second half of 2023, buoyant coal supply and demand weakness have resulted in increases in coal inventories globally and sharp declines in prices since their 2022 highs," BMI says.

Production in key coal-consuming markets such as India and China has risen significantly.

"We forecast global thermal coal consumption to decline by 0.2% year-on-year in 2024, after displaying stagnant growth in 2023. On the other hand, we expect global thermal coal production to grow by 3% year-on-year in 2024, similar to 3.1% year-on-year in 2023. Together, these figures will lead to a wider global surplus of thermal coal in 2024,” BMI says.

Major importers such as China and India are pushing towards greater domestic production, ensuring weak import demand for this year.

In China, coal demand strengthened in 2023 but is showing signs of slowing down this year. Data from China’s customs authorities shows that total coal imports grew by 22.3% year-on-year from January to May, compared with a 101.7% year-on-year increase overall in 2023, reaching 311-million tonnes.

This rise in imports has not benefited Newcastle thermal coal prices, which ranged between $130/t and 160/t in the second half of 2023 and $115/t to $145/t so far this year. Severe droughts in 2023 drove China's increased coal imports, but BMI expects a La Nina weather event could reduce coal power demand owing to heavier rains.

Over the long term, China remains committed to coal, having emphasised its importance during the National Congress in 2022 and the Two Sessions meeting in March 2023. Developments in China will significantly impact on global coal demand, as China's power sector alone accounts for one-third of global coal consumption according to the International Energy Agency.

"Looking closer at demand, we expect Europe to drive global coal demand weakness in the coming months. Throughout 2022 and 2023, European markets have actively sought to diversify away from Russian energy resources following the start of the Russia-Ukraine conflict. While this led to a short-term rise in coal demand, the region managed to significantly increase its gas storage levels,” the research firm notes.