The value of Australia’s metallurgical coal exports is forecast to rebound from A$23 billion in 2020-21 to peak above A$66 billion in 2022-23, tracking price movements, before falling back to A$44 billion by 2023-24, according to the quarterly outlook report by the Australian government’s Department of Industry, Innovation and Science.
Metallurgical coal prices fell sharply between late May and early July this year, before recovering slightly. Supply continues to face disruptions from floods in Australia and other weather events, but the fall in demand has allowed the market tightness to ease nonetheless. High global energy prices are likely to act as an ongoing curb on steelmaking, especially in China and in Europe, where gas shortages are likely to force some moderation in overall energy use over the winter. Price risks have shifted to the downside in recent months. Falling global demand and rising interest rates have added to the risk of a global recession.
The Australian premium hard coking coal price is forecast to average at $400/mt in 2022, but is expected to fall by almost half as supply conditions normalize. Prices are ultimately expected to drop to around $220/mt by 2024.
Australian metallurgical coal exports and prices have increased in 2022, supported by rising demand in several major markets, including Japan, Taiwan, and South Korea. Australia’s metallurgical coal exports to Europe are also increasing, and should lift further as the second half of 2022 progresses. However, recent falls in global steelmaking have softened the demand for metallurgical coal, reducing the record revenues of metallurgical coal producers. Producers have increasingly directed metallurgical coal into thermal coal markets in recent months, capitalizing on favorable thermal coal prices.
Ongoing weather issues represent the primary risk to Australian production at present. Flooding and weather disruptions are already having an impact on exports early in 2022–23, with significant impacts on mines and transport in July. Higher production in New South Wales and Queensland is expected to push Australia’s exports up from 171 million mt in 2020-21 to 180 million mt by 2023-24.
In addition, global metallurgical coal supply is recovering as disruptions related to weather events and Covid-19 ease. However, the full effects of EU sanctions against Russia are yet to be felt and may disrupt markets further from September.