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Newcastle thermal coal prices are expected to remain low in the second half of June and into July, as discounts offered for coal of other origins continue to lure Asian buyers away from Australian coal.
Asian buyers, who stayed away from Australian coal after prices soared following Russia’s invasion of Ukraine, are reportedly continuing to buy more coal from Russia, thanks to the discounts offered, and Indonesia.
The price of Newcastle’s 5,500 kcal/kg NAR coal with 23% ash was valued at $178/mt FOB on 14 June, down 11% from 31 May and down sharply from nearly $300/mt in the first half of March.
This is an extended period in which Asian buyers have stayed away from Australian coal of this grade [5,500 kcal/kg NAR]. This grade is used for blending and Japan, South Korea and Taiwan are not big users of this grade anyway. India also did not purchase it for blending.
Australian coal prices spiked earlier this year after Russia’s invasion of Ukraine prompted users to substitute Russian energy sources. At the time, EU countries and Japan pledged to stop importing Russian coal, thus increasing demand for Australian coal.
As a result, the NAR price of Newcastle 5,500 kcal/kg rose from $157.05/mt FOB on 23 February, one day before the invasion, to $297/mt on 11 March. Since then, prices have averaged $206.40/mt until 14 June.
Market sources said that since Asian buyers are not yet interested in buying Australian high ash coal, prices are more at risk of falling due to the availability of Russian coal.
According to sources, buyers from India, Thailand, Vietnam and South Korea are buying Russian coal and imports are expected to increase. The Office of the Chief Economist of Australia, in its latest quarterly Resources and Energy Report released in March, said that domestic thermal coal production will face challenges in 2022, with flooding disrupting mines in New South Wales and Queensland due to a La Nina weather event in the first half of the year.
