Coal price forecast: How will the price change in 2024 and beyond?

One of the world’s major commodities, coal, is a must-have resource in pretty much every country because it is widely used in a number of important industries. Its price depends on a number of factors, including geopolitics, energy consumption, and technical progress, so making coal price forecasts is no easy task. This article provides insights into coal price performance and related news over the last years, explains what it depends on, how coal consumption trends are changing over the globe, and what to expect from the coal price in 2023 and further on.

Table of Contents

Where is coal used?

Historical coal price performance

Coal price news

Factors that shape coal prices

Coal price prediction 2024-2030: Experts’ opinions

Conclusion

FAQ

Where is coal used?

Among the various uses for coal, producing electricity is the most significant. The leftovers of dead flora buried beneath layers of dirt gave rise to this fossil fuel millions of years ago.

The United States Geological Survey classifies coal into four categories based on how well it heats:

1. Hard coal, or anthracite, is ranked highest. It has a low amount of volatile matter and a high percentage of fixed carbon. 
2. Bituminous coal is utilized to make steel due to its high heating value.
3. Sub-bituminous coal, with a low to moderate heating value, comes in third. Both lignite and sub-bituminous coal are utilized to produce energy.
4. Lignite coal (grade four) has a high moisture content and low heating value.

79% of the global coal trade accounts for thermal coal, often known as power station coal. It is burned to produce steam, which drives turbines connected to generators. Rotating generators then convert mechanical energy into electricity. This process, known as combustion, harnesses the energy released from burning coal to generate a significant portion of the world's electrical power.

The remaining coking coal is used in metallurgy primarily as a reducing agent in the process of extracting metals from their ores. During smelting, coal undergoes combustion, producing carbon monoxide, which reacts with metal oxides to form pure metal. Additionally, coal provides the necessary heat for these high-temperature processes. Its abundant carbon content facilitates the reduction of metal compounds, making it a vital resource in the production of various metals like iron and steel.

Historical coal price performance

Before we discuss the coal price performance in recent years, let’s do a quick overview of the rates over the last 50 years:

1. Coal prices remained relatively stable during the early 1970s, reflecting a balance in supply and demand. In 1973, the oil crisis triggered a surge in energy prices, prompting increased coal demand and leading to a notable rise in coal prices. This period marked a turning point for coal as a key energy source.
2. 1980s coal prices stabilized as economic shifts and increased energy efficiency measures contributed to a more balanced market. Prices during this decade generally maintained a steady trajectory.
3. The 1990s saw a decline in coal demand as cleaner energy sources gained popularity. Environmental concerns and regulatory measures also played a role in shaping energy consumption patterns.
4. In the 2000s, growing demand from emerging economies, particularly China, caused a significant increase in coal prices. The commodity became a focal point of global energy discussions as developing nations sought to meet their escalating energy needs.
5. The global economic downturn in 2008 led to a temporary drop in coal prices. Reduced industrial activity and a slowdown in economic growth contributed to weakened demand.
6. In the 2010s, the world witnessed fluctuations in coal prices due to changing global energy dynamics. While there were sporadic increases, the overall trend leaned towards a decline, driven by environmental concerns and a shift towards renewable energy sources. Coal prices hit multi-year lows in 2016. Factors such as oversupply, reduced demand from key consumers, and increased focus on cleaner energy alternatives contributed to this downturn.
7. The early 2020s continued with a decline in coal prices. Factors such as divestment trends, a global push for renewable energy, and the economic impact of the COVID-19 pandemic further weakened the coal market, signaling an ongoing transformation in the energy landscape.

In the second half of 2022, coal prices decreased, although they are still much higher than their five-year average. Due to more supply and warmer weather, the benchmark prices in Australia and South Africa have dropped by around 50% from their peaks in September and April 2022, respectively. The disparity between the two standards, which was brought about by the Australian tropical cyclone season's impact on supply as well as Asian utilities' restricted capacity to convert from high-grade Australian coal to lower-grade substitutes, has all but vanished.

In 2022, demand worldwide hit a record level. Due to electricity generating facilities switching from natural gas to coal and bridging the supply gap caused by lower output from other sources, such as nuclear and hydropower, consumption increased sharply in both India (10%) and Europe (5%). Due to COVID-19 limitations, China's economy continued to develop slowly, despite a little increase in consumption. However, in contrast to Europe, the United States' coal usage fell by 8% in the fourth quarter of 2022 as a result of a less pronounced increase in natural gas prices.

Europe received more coal from South Africa and Colombia than from Russia, which decreased its shipments to that continent. In 2022, South African exports to Europe increased by over six times, while US exports have been relatively steady (though some have been diverted to Europe). After the EU banned Russian coal in 2022Q3, Russian exports — which had grown overall — were shifted to China and India.

Coal price news

Here is a rundown of news that will help you understand the coal price performance over 2022 and 2023:

• US coal consumption continued to decline in 2022, falling by around 7% to 457 Mt, as a result of a continuous decline in the output of coal-fired electricity.
• China's consumption for coal increased by 4.6% in 2022, reaching a record-breaking 4,519 Mt.
• With an impressive 6.9% GDP growth in 2022, India became the first nation outside China to surpass the 1.1 bt mark in coal demand, with a total of 1,155 Mt used.
• As projected in the coal 2022 report last December, global coal demand reached a new all-time high in 2022, rising above 8.3 billion tons.
• Demand for coal in the European Union rose by 0.9%.
• By the end of 2022, coal prices at Black Sea ports had converged with ARA, while coal prices at Baltic ports and the port of Vostochny persisted in being sold at a 30%–40% discount. Russian and ARA pricing followed a similar path in the first half of 2023, with prices at Russian ports getting closer to the starting nominal price points of 2021.
• Chinese purchasers boosted prices for metallurgical coal in February 2023 by starting up imports from Australia.
• The forward price curve for API2, which is a pricing index for coal deliveries to Europe, adopted a flat trend in the first half of 2023, after spot prices saw a steep decrease at the end of 2022 then stabilized.
• Due to an excess supply of thermal coal in the Chinese market brought on by rising domestic output and a sharp increase in imports, prices for thermal coal are predicted to stay low for the remainder of the year and into 2024 (news dated November 26th, 2023).

Along with the oil and natural gas markets, the coal market has seen significant volatility over the past three years due to the epidemic and Russia's invasion of Ukraine, which precipitated the world's first real global energy crisis. Coal markets have been less erratic in 2023, but there may yet be more turbulence to come.

Factors that shape coal prices

The coal price significantly depends on demand in different countries. Here is what impacts it:

• Global economic growth drives industrialization and increased energy consumption. During upswings, industries require more energy, often sourced from coal. Conversely, economic downturns can lead to reduced industrial activity and a decline in energy demand.
• Stringent environmental policies and regulations, aimed at reducing carbon emissions, may favor cleaner energy sources over coal. Governments implementing policies such as carbon pricing, emissions standards, or renewable energy mandates can directly influence the demand for the asset.
• Advances in renewable energy, storage and efficiency can make alternative sources more cost-competitive. As cleaner innovations become more accessible and affordable, industries and power generators may shift away from coal.
• Political factors, including changes in government policies, international relations, and geopolitical tensions, can affect the stability of coal markets. Countries’ decisions may impact investments in the coal industry and influence the overall demand for coal. Coal competes with natural gas for electricity generation. When natural gas prices are low, it can become a more attractive option, leading to reduced demand for coal. Conversely, high natural gas prices may make coal a more competitive option.
• Infrastructure projects, such as construction and urbanization, drive demand for electricity, which is often met by coal. The demand for coal can increase in regions undergoing rapid development.
• Seasonal variations impact energy consumption patterns. Cold winters or hot summers increase the demand for heating or cooling, affecting the need for electricity generated from coal.
• The cost of extracting coal and transporting it to consumers influences its overall pricing. High mining and transportation costs can make coal less competitive compared to other energy sources.
• The increasing adoption of renewable energy sources, driven by advancements in technology and environmental awareness, can reduce the reliance on coal for electricity generation.
• International trade relationships and policies affect the flow of coal across borders. Changes in trade dynamics, tariffs, or trade agreements can impact coal exports and imports, influencing global coal markets.
• The implementation of carbon pricing mechanisms, such as carbon taxes or cap-and-trade systems, makes coal more expensive compared to low-carbon alternatives, influencing investment decisions and demand.
• Availability of funding and investment for coal projects affects coal production capacity and can influence the overall supply of coal, impacting its pricing and demand.

Coal price prediction 2024-2030: Experts’ opinions

According to Fitch Solutions, the price of coal for power plants will be $190 per ton in 2023, down from the prior projection of $220 per ton.

Bank of America (BofA) Global Research predicted that coal prices will average $300 per ton in 2023 and $260 in 2024, down from a projected $334.1 in 2022. According to BofA's 2025 coal price prediction, thermal coal prices will drop even more to $190 in 2025 and $140 in 2026. According to the bank's long-term coal price prediction, coal will average $83.20 per ton after 2026.

According to Trading Economics' economic projection as of April 25, thermal coal might trade for $187.94 at the end of the quarter and rise to $213.91 in a year.

Statista provides the following coal price predictions:

The Hindu Business Line website expresses a different opinion, taking into account that the sanctions put in place when Russia invaded Ukraine changed market expectations significantly. It predicts that coal prices would rise to exceed $200 per ton by mid-2022 and stay there until mid-2025.

Conclusion

Although coal is a critical resource in many countries, its price can undergo a serious drop over the coming years, but a lot depends on the region. It is anticipated that China and India will continue to industrialize and urbanize, so their needs for coal will only grow in the years to come. Nonetheless, there has been a change in favor of greener coal technology, such as more efficient and carbon dioxide-emitting ultra-supercritical coal-fired power plants. Countries with the most advanced economies will adopt them, which will lower the need for coal in the US, the EU and Australia.

FAQ

What will the coal price be by the beginning of 2024

The above-mentioned sources (Fitch Solutions, Bank of America and others) provided optimistic coal price predictions at the end of 2022: $200 to $300. However, judging by the current picture, the coal price prediction by the beginning of 2024 is $110-120, so the cost of the asset will not change dramatically.

What will the price of coal be in 2025?

Bank of America predicts that coal will be worth $190 by the end of 2025, with Statista’s forecast being pretty much the same.

What is the projected future of coal?

Coal is still expected to be a crucial asset during the upcoming years; however, many countries are seeking and leveraging alternative sources of energy, which will impact the demand in the future. Most likely, eco-friendly energy sources will eventually replace coal, but that will be is a matter of decades.

What is the coal supply in 2023?

Here are coal supply forecasts for different countries according to the IEA. China – 631 Mt (a 3.3% rise). Indonesia – 353 Mt (a 16% rise). The US – 519 Mt (a 4.2% drop). The EU – 321 Mt (an 8% drop). Russia – 429 Mt (a 2.9% drop). Australia – 460 Mt (a 2% rise).

What is the prediction for the coal market?

Because of their vast populations and expanding economies, China and India in particular will continue to consume a lot of coal. Meanwhile, both Europe and the US will face a decrease in coal demand because of increasing reliance on renewable energy sources and the enforcement of more stringent environmental laws.