Resurgent coal market hits new high as Chinese, Indian economies

Soaring demand for electricity in China and India has put a rocket under the coal market with prices for the fossil fuel hitting a record high despite efforts to de-carbonise the global economy.

Australian miners have been fetching up to $US180 a tonne for their benchmark thermal coal deliveries this week, setting a new high of more than $240/t in Australian dollar terms.

The record comes barely six months since prices plumbed lows of just $US50/t as miners dealt with the twin blows of a COVID-induced economic downturn and China’s unofficial decision to ban Australian imports.

Viktor Tanevski, the principle coal research analyst at consultancy Wood Mackenzie, said there had been a surge in power use — which was closely tied to coal consumption — as major Asian economies reopened.

Asia ignites price ‘fireworks’

Mr Tanevski said the market had been further propelled by problems among major coal producers such as Indonesia, starving supply and driving prices higher.

“Consequently, we’ve had fireworks in the thermal coal pricing indices,” Mr Tanevski said.

The resurgent coal market stands in stark contrast to last year when Beijing added coal to its list of Australian products hit with trade strikes.

While the decision was a blow to producers initially, Mr Tanevski said they had since been able to find other markets as global trade “rebalanced”.

Chief among them was India, which Mr Tanevski said was on track to take up to 20 million tonnes of Australian coal in 2021.

Established markets such as Japan, South Korea, and Taiwan were also buying significant amounts of coal from Australia.

And in a sign of the times, Mr Tanevski said there had been several shipments of Australian coal to Indonesia, despite the fact it was one of the world’s biggest suppliers in its own right.

China blacklist backfires

He said all roads ultimately led to China, which Wood Mackenzie predicted would help underpin elevated prices throughout the rest of the year.

“That market [China] has fallen to zero,” he said.

“They’ve had to procure coal increasingly from Indonesia and Russia and that has opened up opportunities for Australian coal to penetrate an increased market share in other markets, particularly North Asia.”

Despite the surge in prices, Mr Tanevski noted that the volumes of the seaborne thermal coal trade had not returned to their highs of 2019.

The Institute for Energy Economics and Financial Analysis (IEEFA), an anti-fossil fuel lobby, said the smaller size of the trade was of greater…