Global trade in thermal coal is to grow by just 7mn t between 2020 and 2023, rather than the 65mn t previously forecast, according to the latest forecast by the Australian government's commodity forecaster.
The Australian Office of the Chief Economist's (OCE) latest Resources and Energy Quarterly (REQ) expects global trade in thermal coal to increase to 1.032bn t in 2023 from 1.025bn t in 2020 it said in its June REQ released today. It previously forecast that it would increase to 1.101bn t in 2023 from 1.036bn t in 2020 in its March REQ.
The downgrade is largely because of a slower than previously expected increase in coal imports into India and faster falls into Japan and South Korea. These countries have supported Australian exports during Beijing's unofficial ban on Australian imports into China since October, with the weaker buying activity to drag on Australian exports over the next 2½ years.
The OCE revised up its forecast for Chinese imports of thermal coal and for Indonesian exports, although it cut its projections for Australian, Russian and Colombian exports.
It has also revised up its Australian thermal coal price forecast for 2021 and 2022 but revised it down for 2023. The increase is based on the recent rally in thermal coal prices, which is most pronounced for high-grade thermal coal predominantly sold to Japan and South Korea. Beijing's informal restriction on Australian imports has led to large discounts for mid-calorific Australian coal that has led to a two-tiered price across most coal blends, creating added complexity across coal supply chains, according to the June REQ.
Argus last assessed this higher grade coal at $128.77/t fob Newcastle on 25 June, up from $81.44/t on 31 December, with the lower grade 5,500 kcal/kg NAR coal at $73.85/t fob Newcastle that was up from $52.99/t over the same comparison. The heat-adjusted premium on a NAR 6,000 kcal/kg basis for higher grade thermal coal was $48.21/t on 25 June, up from $23.63/t on 31 December and from $8.65/t at the end of August. This record premium is higher than the around $43/t high in September 2018 that led Australian sellers to look at options to further wash coal to increase its calorific value.
The OCE's 2021 average high-grade thermal coal price forecast of $110/t fob Newcastle is up from the $66/t that it forecast three months ago. But it is lower than the average of $94/t fob Newcastle that Argus has assessed for the 6,000 kcal/kg NAR grade coal year to date for 2021.
| Australia's thermal coal forecasts | (mn t) | |||
| 2020 | 2021 f | 2022 f | 2023 f | |
| Global trade | 1,024.7 | 1,019.5 | 1,029.8 | 1,031.5 |
| Exporters | ||||
| Indonesia | 390.3 | 448.0 | 450.0 | 442.0 |
| Australia | 199.5 | 200.1 | 210.5 | 213.4 |
| Russia | 151.0 | 152.0 | 162.0 | 166.0 |
| Colombia | 55.0 | 56.0 | 57.0 | 57.0 |
| South Africa | 74.4 | 80.0 | 83.0 | 80.0 |
| US | 20.3 | 32.0 | 32.0 | 24.0 |
| Importers | ||||
| Asia | 810.2 | 813.1 | 826.8 | 828.4 |
| China | 218.3 | 216.5 | 215.7 | 205.4 |
| India | 165.1 | 164.8 | 169.9 | 174.5 |
| Japan | 119.0 | 120.0 | 120.0 | 120.0 |
| South Korea | 90.0 | 89.0 | 90.0 | 90.0 |
| Taiwan | 54.0 | 55.0 | 54.3 | 53.6 |
| Europe | 106.7 | 99.0 | 96.0 | 96.0 |
| Prices | ||||
| Contract price expectation June update ($/t)* | 70.3 | 110.0 | 77.9 | 71.9 |
| Contract price expectation March forecast ($/t)* | 68.8 | 66.2 | 67.1 | 71.3 |
| Source: OCE REQ | ||||
| f = forecast, *real in 2021 | ||||
