Structural weaknesses hinder the coal price outlook

Subject

Coal market

Significance

After a sustained price decline, coal producers are taking relief from the sharp rise in thermal coal prices this year, with coal outperforming both oil and natural gas. However, looking beyond the boost from US President-elect Donald Trump’s support for US manufacturing, the price spike is largely the result of thermal coal shortages because of Indonesian and Chinese production cuts, which could be quickly reversed.

Impacts

• The price spike since summer 2016 has returned many coal producers to a cash-positive position.
• Cold weather will increase demand, pushing up prices throughout the northern hemisphere winter.
• China is likely to take further measures to boost domestic production.