Thermal coal exports from Australia are forecasted to keep rising in next two years but value will decline, according to Resources and Energy Quarterly issued by Australia's Department of Industry, Science and Resources.
A gradual recovery from recent supply outages is expected to see Australian thermal coal exports rise from 182 million tonnes (Mt) in Financial Year (FY) 2022–23 to 203 Mt by FY2024–25, the report said.
Till now, the Newcastle benchmark price of 6,000 Kcal/kg NAR coal has declined from the peak of $460/t in 2022 to below $150/t, and the report forecasts the price level will decline from almost $180/t over 2023 to around $115/t by 2025.
As prices decline, export values of thermal coal are expected to fall from a peak above A$65 billion in FY2022–23 to around A$28 billion by FY2024–25.
The energy export value in the country will decline to below A$400 billion in FY2023-24 and further to A$352 billion in FY2024–25, as global demand abates and increased commodity supply drags down prices.
Global imports of thermal coal are on track to edge down by around 2.5% year on year in 2023 as demand for seaborne coal from China declines. Increases in demand for India and Other Asia offer a partial offset.
This year's Northern Hemisphere summer brought unusually intense heat across several highly populated countries and regions, resulting in higher thermal coal demand for generating power to cool dwellings and offices.
In China, high temperatures through July and early August kept Chinese imports near the strong levels of early 2023, maintaining pressure on the seaborne coal market. Elsewhere in Asia, coal demand remains mixed, with India showing some decline from a peak in May.
Data showed, thermal coal exports from Australia to China have recovered to levels before October 2020 when China unofficially banned coal imports from Australia.
The increases in Chinese demand offset reduced demand from Europe and other areas, maintaining Australian thermal coal demand in third quarter unchanged.
But as China entered into slack season for coal demand, thermal coal prices are estimated to further weaken in next quarters.
It is expected that weather conditions will continue to exert upward pressure on imports. Structural factors should result in declining imports from late 2023 to 2025. The combination of uncertain domestic demand and strengthening domestic supply is expected to reduce Chinese seaborne imports from 231 Mt in 2022 to 200 Mt by 2025.
The pace of recent thermal coal use has accelerated in India following the conclusion of COVID containment measures. India remains the most significant growth market for thermal coal, with a substantial rise in imports expected during the next two years.
Indian government also put great efforts in upgrading infrastructure to accelerate domestic coal production, including improving railways network. The report pointed although India tried hard to raise domestic production, it's demand for imported coal is highly likely to keep climbing.
Indian imports are expected to rise from 153 Mt in 2022 to 209 Mt by 2025. The pace of growth is expected to slow after 2025, with imports stabilizing in the early 2030s and starting to fall a few years later.
Japan and S Korea
Japan is expected to remain a significant thermal coal importer in next two years. The Japanese Government remains committed to its 2050 net zero targets and accelerated shutdown of coal-based power utilities. It also aims to extend operations of nuclear power plants to replace coal.
During the period, Japan's coal imports are expected to remain steady or reduce mildly. With full realization of cutting coal usage, coal consumption decline in Japan may speed up around 2030.
South Korea's latest energy plans include proposals to cut coal-fired power generation by around half by 2030, eliminating it entirely by 2050.
The country's government also sought to replace imported coal with natural gas and renewable energy. Annual coal import demand in South Korea is expected to stabilize around 90 Mt by 2025.
Production capacity coal-fired power plant across southeastern Asia fell by 63% between 2015 and 2021, but a sizeable number of plants remain under construction. Nations in the region are estimated to have collectively imported about 155 Mt of thermal coal in 2022. The volume is expected to rise to above 175 Mt by 2024. Some South Asian countries may not see their demand peak until 2040.
Temperature in Europe remained above average levels in recent several months, while local coal demand was also reasonably controlled by stable natural gas prices and increased reserves.
European countries have poured large money into natural gas and renewables since the outbreak of Ukraine-Russia war, and they also built up large reserves of coal, which will help reduce pressure over coal imports even natural gas storage declines.
So far, European countries including Finland, Denmark, France, Netherland, Italy and Spain have promised to fully eliminate coal use by 2030, and the UK will close the final coal-based power plant by 2024.
Overall, thermal coal prices were still at high range despite slumps since this year. The existed uncertainties for long-term transportation in coal industry will impact investment in coal projects in next several years. The lack of new profits may reduce coal supply structurally and heightened the possibility of price increases. This could intensify as more mines faced higher maintenance costs for timeworn facility.
(Writing by Rebecca Liu Editing by Harry Huo)
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