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From Focus Economics: Prices for Australian thermal coal rose over the last month, averaging USD 408.4 per metric ton in July, which was up 3.4% from June’s price and was 180.0% higher than in the same month last year. Meanwhile, on 29 July, the commodity traded at USD 407.9 per metric ton, which was 5.7% higher than on the same day of the previous month. As Europe’s energy crisis worsened in July, demand prospects for Australian coal improved. The EU has pledged to phase out most Russian oil imports by the end of the year and ban Russian coal imports from August. Meanwhile, Russia has gradually reduced gas exports to Europe since the start of the war in Ukraine, with the Nord Stream pipeline—through which most Russian gas to Europe flows—now operating at 20% capacity. In response to this, Europe is turning to Australian coal, with Germany’s decision in July to reactive two mothballed coal plants the latest example. Global coal consumption will rise to the highest level since 2013 this year, according to the IEA. Weaker supply also supported prices, as exports from the Port of Newcastle in Australia—the world’s largest coal port—fell to a five-year low in July due to flooding. Thermal coal prices should soften by the end of 2022 as Australian production picks up: The La Niña weather pattern has now ended, and Covid-19 related work absences should decline. Meanwhile, slowing global economic momentum should dent demand. However, our panelists see prices remaining around USD 60 per metric ton higher than before the war in Ukraine, with the EU’s turn to coal supporting prices. The key risk to the outlook is further Covid-19 lockdowns in China. The Australian government’s climate change policy, further restrictions on Russian energy exports to Europe and more heavy rains in Australia are other key factors to watch.
