From an average of $105 a ton in 2018, thermal coal benchmark spot price (Newcastle 6,000 kcal/kg) steadily declined in July and August, hitting a 39 month low of $61 a ton in late August.
The thermal coal spot price averaged an estimated $67 a ton in the September quarter of 2019, 13 percent lower than the previous quarter and 40 percent lower year-on-year.
The price slide appears to have bottomed, due to the emergence of supply cuts from the US, Colombia and Indonesia.
“Nevertheless, the benchmark thermal coal spot price is forecast to remain weak over the rest of 2019. With a number of Chinese ports reaching their assigned annual quotas for coal imports, an expected sharp drop in China’s thermal coal imports towards the end of 2019 is expected maintain pressure on prices,” the latest Resources and Energy Quarterly report from the office of the chief economist said.
Strong short-term demand from Japan is expected to provide an offsetting effect, as nuclear reactors are closed for planned maintenance until early 2020. In the longer term, weak overall demand is expected to keep prices subdued over the outlook period.
The price is forecast to average in the low to mid $70s a tons range over the outlook period, down from an average of $105 a tons in 2018. Towards the end of the outlook period, a gentle recovery in the price is expected, as supply growth slows. There are several risks to the price outlook for thermal coal. Developments in China’s import policies and domestic coal markets are likely to drive ongoing volatility in thermal coal imports and prices. Supply from marginal producers in the US and Indonesia could also take longer than expected to contract, requiring lower prices to bring the market back to balance.
Weak demand pressure on thermal coal price
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