Global coal market will decline in the long term

Subject

Outlook for global coal markets.

Significance

Thermal coal prices hit a record of 210 dollars per tonne in July 2008 and have declined since 2011. Last year, prices averaged 57 dollars per tonne and until recently struggled to hold above the 45 threshold. The slide is due to environmental concerns, which are shifting power generation towards low-carbon sources. After several years of 300 million tonnes (mt) yearly growth, global coal demand fell by 63 mt in 2014 and by 180 mt in 2015. Although many mines have been shut, production fell by less than demand.

Impacts

• This year Russia may surpass its 2015 production by 10 mt, all of which will be exported.
• Australia's compliance with Paris emissions reduction targets may thwart domestic coal projects mulled by China's Shenhua and India's Adani.
• Having lost its export markets, Indonesia is redirecting its coal production towards the slated increase in domestic power generation.
• Colombia has entered the Indian market thanks to record-low freight rates; their increase may reduce flows to the subcontinent.
• Japan targets a 26% reduction in emissions for 2030 by limiting coal use to 26% of total power output.