The Australian thermal coal market is currently experiencing a downturn, with contract prices hovering around $100 per tonne, reminiscent of pre-energy crisis levels, reported Bloomberg.
This price drop is impacting producers and could be seen as a sign of coal’s decline, but the situation may be temporary, the report said.
The decline in investment in new coal production, driven by shareholder and banking resistance, contrasts with the rising demand in India and China.
These countries’ needs are outpacing the growth of renewable energy sources, suggesting that coal could remain profitable for longer than anticipated, despite the potential impact on climate targets.
Glencore CEO Gary Nagle highlighted the company’s commitment to coal during an earnings call last month, noting the shift in perception of the fuel. “A lot of our minority joint venture partners around the world, more particularly in Australia, wanted to get out of steam coal,” he said.
The company announced a decline in its 2024 production of copper, cobalt, zinc, nickel and thermal coal, aligning with its guidance in January 2025.
The lack of new seaborne coal capacity, due to financial institutions’ reluctance to fund coal projects, suggests a tighter market than expected in the medium-to-long term.
Globally, new thermal coal projects are primarily concentrated in China and India, with few other nations planning significant output increases.
The electrification of homes, increased car charging and construction of factories continue to drive coal demand, particularly in India, where it is expected to grow by around 3% annually until 2030, according to coal ministry estimates.
The demand for coal is also being fuelled by the tech industry’s need for data centres to support cloud computing and AI.
This has led to utilities in countries such as the US, Japan and Germany relying more on coal to meet energy needs, even though they planned to phase out coal plants.
Despite the current oversupply and low prices, the International Energy Agency has revised its coal demand outlook higher in recent reports, indicating a 1% rise through 2027.
Furthermore, China’s coal inventories have swelled, leading to a decrease in foreign coal purchases by China Shenhua Energy and calls from coal associations to adjust production.
Two major coal industry groups in China, the China Coal Industry Association and China Coal Transportation and Distribution Association, have urged their members to reduce coal production and limit imports to address an oversupply issue, reported Reuters. State-owned coal giant Shenhua Energy has already halted imports.
The lull in the Australian thermal coal market may be short-lived. Any increase in demand, such as from hotter weather or continued growth in Chinese coal requirements, could quickly shift the market dynamics.
Despite structural pressures, the overall growth in energy demand suggests that coal consumption may continue to rise.
