In 2023, a correction occurred in the thermal coal market: the cost of Australian Newcastle coal decreased from $370/t at the beginning of the year to the current $130/t (by 65%). The reason is that the coal market has become more balanced. This was influenced by a significant increase in coal production in China and India (70% of global coal production): by the end of the year, the increase could be 3.3% and 7%, respectively (according to estimates of the International Energy Community). This contributed to the growth of supply on a global scale.
China actively increased not only domestic production, but also imports of coal. The goal is to strengthen our energy security.
How the indicators changed during the year:
- the average monthly production volume in China increased from last year’s 380 million tons to 395 million tons (data for 10 months);
- record production volume – 417 million tons in May;
- import growth – in 10 months of 2023, China purchased 122% of the volumes for the entire 2021, a record 250 million tons.
Supplies increased mainly due to the lifting of the secret embargo and the resumption of imports from Australia – thus, Australia’s share in coal imports increased from last year’s 2 to 16%, which increased the diversification of coal purchases for China.
Forecast of the average cost of thermal coal in 2024:
In the baseline scenario, no significant changes are expected in the thermal coal market. There will be no supply shortage if China remains a priority for energy security and production and import volumes remain significant.
The average price forecast for thermal coal in the base scenario is $130/t (Australian FOB Newcastle).
A risky scenario is a recession and a slowdown in Chinese economic growth to 3.3%. In this case, the demand for thermal coal may decrease. However, this is unlikely to have a radical impact on the cost, since coal prices are already close to the global production cost ($100/t).
The average price forecast for thermal coal in the risk scenario is $100/t (Australian FOB Newcastle).