The value of Australia’s metallurgical coal exports is forecast to rebound from A$23 billion in 2020-21 to peak above A$60 billion in 2022-23, tracking price movements, before falling back to A$41 billion by 2023-24, as seasonal and short-term supply issues pass and supply and demand come into balance, according to the quarterly outlook report by the Australian government’s department of Industry, Innovation and Science.
Metallurgical coal prices remained at historic highs at more than $520/mt amid supply disruptions and market uncertainties as a result of the Russian invasion of Ukraine. Price pressures softened in April this year, as disruptive weather conditions in Australia eased, allowing some extra supply to enter markets. However, renewed flooding in May and June affected Australian coal output again. The report noted that the prices are expected to ease over the next two years, with volatility also expected to decline. The Australian premium hard coking coal price is forecast to average at $420/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. A range of factors such as weather events, potential Covid disruptions, import bans from China and Europe, and the conflict in Ukraine will play out in unpredictable ways over the outlook period. Risks remain mostly on the supply side, with low inventories likely to exacerbate the impact of any further supply disruptions in 2022.
Australian metallurgical coal exports and prices have lifted recently, driven by strong growth in demand in several major markets, including Japan, Taiwan, and South Korea. The demand in Brazil, typically a minor market, has seen rapid growth in recent months. Australia’s metallurgical coal exports to Europe rose by almost 25 percent in the year to March 2022.
Australian supply recovered in April, but renewed rains in May disrupted operations in parts of New South Wales and Queensland. Producers in the US and Australia had previously pushed to expand output and restart paused mines, with some of this effort now paying off. Higher production in New South Wales and Queensland is expected to push Australia’s exports up from 171 million mt in 2020-21 to 174 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 market continues to face elevated risk premiums and high freight costs. Russian coal continues to reach Europe, though with less reliability than before. This flow of metallurgical coal is expected to largely cease by August, when EU sanctions take full effect.