Global thermal coal prices are anticipated to stabilize this year at approximately $200 per tonne, less than half of the record highs witnessed in 2022, according to industry officials and analysts.
This respite is attributed to an increase in coal supplies, providing relief to consumers who were affected by the volatility experienced in the previous year.
Analysts predict that the benchmark Newcastle coal index will average between $175 and $212 per tonne in 2023. Although this represents a significant premium compared to the $86 average observed in the ten years prior to Russia’s invasion of Ukraine in 2022, it still signifies a decline of over 50% from the peak reached in September, which stood at $440.
Last year, stringent Western sanctions imposed on Russia resulted in European buyers paying a premium for coal, exacerbating global prices. Russia was previously a major supplier of coal and natural gas to Europe before the war.
However, the anticipated narrower price range for coal this year will enable utilities and other users to plan their fuel purchases more effectively, thereby alleviating pressure on economies grappling with high inflation. Fuel costs typically contribute to over half of the total expenditure involved in electricity generation.
Alexandre Claude, CEO of DBX Commodities, an analytics firm based in London, expects reduced volatility in 2023 compared to 2022, as trade flows have stabilized following the “energy shock” triggered by the Ukraine invasion.
Argus Consulting projects a 4.4% increase in global coal exports this year, with imports set to rise by 5%. China is expected to witness an 11% surge in imports, while Australian exports, after three consecutive years of decline, are projected to rise by 9.4%.
World Coal Association Chairman, July Ndlovu, who is also the CEO of South Africa’s Thungela Resources, stated that Europe’s disproportionate influence on coal prices is diminishing. Ndlovu emphasized that the future fundamentals for energy would be driven by China and India due to their growth and energy demand.
Westpac, an Australian bank, forecasts that the Newcastle benchmark will average $193 per tonne over the nine months ending December 2023. In April, Citi predicted an average of $175 over a 9- to 12-month period. Additionally, Australia’s chief economist expects the Newcastle benchmark prices to average $212 this year.
As of Monday, the price of Newcastle coal stood slightly above $159 per tonne on a free-on-board basis. This figure falls within the range of $159 to $179 that has been maintained during the current quarter, indicating a significant deviation from the $180 to $403 range observed in the first quarter.
“We anticipate that coal prices, including the Newcastle benchmark, will remain supported primarily due to higher production costs for coal miners,” explained DBX’s Claude, clarifying the reason behind the unlikely return to pre-invasion and pre-pandemic price levels.
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