The prices for premium hard coking coal (HCC) have dropped below $250 per ton amid crashing supply and demand with a prospect for further decline, Trend reports via the Global Coal Forum recap at Wood Mackenzie, a global research and consultancy group.
“Unique premia for thermal coals should signal a turnaround, and diversion of metallurgical coals into the power sector has already begun in earnest. But quality and uncertainty will limit the shift, and its impact on markets. As difficult as it is to imagine, a prolonged price inversion looks to be in the offing”, the report said.
According to WoodMac experts, the investments in the global coal production are expected to decrease by 20 percent, with the highest fall in thermal coal. The outlook may even worsen, if prices fall further.
“With Australia occupying a large share of the project pipeline, some new supply will make its way to market. However, we remain cautious on supply as miners deploy cashflow to repay debt, return capital to shareholders or consider diversification options. Labor shortages will also limit growth in the near term, and add to broader capital and opex (operational expenses) cost pressure from fuel, electricity and consumables”, WoodMac said.
Meanwhile, as WoodMac experts noted, the combination of growing demand for more energy-intensive coal, lack of investment and impending shortage of gas led to the fact that the coal market was in a stressful state even before the start of the Russian-Ukrainian war.
“The impact of sanctions will be significant as Russia supplies over a quarter of the high-energy coal in the global market. Sanctions will divert this coal into markets that do not usually take it - leaving European and North Asian markets short of premium material”, the report added.