For better or worse, coal is here to stay as Asia lifts market share

THE thermal coal market has moved on since the energy security crisis sparked by Russia’s invasion of Ukraine. According to analysts, the outlook for thermal coal and the steel-making type, metallurgical coal, is muted. “We see no signs of price recovery in the near term,” Bank of America says of China’s coal market, which at about 219 million tons (Mt) represents a fifth of all seaborne trade in 2024.It’s worth recalling just how distorted the energy complex became in the wake of the invasion. Thermal coal exported from Australia surged to $450/t in September 2022 from as low as $50/t in 2020, amid the pandemic. For a brief period, coal was trading higher than oil (on a heat adjusted basis) for the first time in history. Two years later thermal coal was trading in a more typical $100/t-$150/t band.More recent market weakness has clearly weighed heavily on companies such as Glencore, as well as many pure-play miners. On the JSE, Thungela Resources has seen its share price sink to R100-R111 a share over the past 12 months from R377.50 in September 2022.But at $100/t, thermal coal prices are hurting about a fifth of suppliers, according to Glencore, the Swiss-headquartered mining and trading group. There’s a similar pressure among metallurgical coal producers at a price of $175/t. This suggests marginal cost support at current levels. Glencore recently concluded a coal supply contract with a Japanese buyer at $7/t above the futures price. Having said that, inventories are high among major consumers such as China, so a recovery in prices could be capped.The long-term outlook for metallurgical coal is favourable, largely because it’s seen as a critical mineral in many parts of the world. Glencore’s acquisition of Elk Valley Resources, the Canadian firm and former Teck Corp. company, has been applauded. But it’s in the outlook for thermal coal where there’s been significant change over the years.“As renewables advance, it is worth noting that the engine of the global economy is moving away from China towards India and Southeast Asia,” said Bank of America. According toThe share of global coal demand consumed in ‘developing’ Asia rose again in 2024, reaching nearly four-fifths, up from below two-fifths in 2000, according to a recent review by the International Energy Agency (IEA). In China, coal demand grew by 1.2% (43Mt) in 2024, reaching a new all-time high. “The country now consumes nearly 40% more coal than the rest of the world combined, largely for power generation,” said the IEA.All in all, coal demand grew by 1.1% in 2024 in energy terms, rising by around 67Mt of coal equivalent (Mtce) (or in physical terms by 1.4% or 123Mt), the agency said.Said Bank of America: “For better or worse, we believe thermal coal will likely continue to play a key role in energising the world economy.” It sees investment in thermal coal power stations for “years to come”, especially in emerging markets, even as Europe, Japan and the US move away from it.“Vietnam’s thermal coal imports rose 31% in 2024 to 44Mt, while global thermal coal demand rose only 1%,” said BMO Capital Markets, a Canadian bank. The surge in coal imports has been driven by Vietnam’s manufacturing industry boom, with coal burning capacity expected to rise a further 15% after the completion of all projects now under construction, the bank said.“Coal is no longer a four-letter word,” said Glencore CEO Gary Nagle at the firm’s year-end presentation in February. “In today’s world, the pendulum has swung back and recognises that energy coal is needed as the world transitions.”Whereas Glencore once forecast coal production would decline in line with its commitment to decarbonisation targets, it’s noteworthy that production from last year to 2028 is hardly changed at about 100Mt annually.A version of this article first appeared in the Financial Mail.The post For better or worse, coal is here to stay as Asia lifts market share appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com