On the back of spiking demand and prices for both metallurgical and thermal coal, the value of Australian coal exports will peak at above $105 billion before gradually easing back to typical levels, an annual $41 billion.
Increasing Chinese demand coinciding with weather disruptions, supply impacts, and the impacts from the Russian invasion of Ukraine has led to two waves of skyrocketing coal prices within the last six months.
The report said global thermal coal markets were undergoing a complex transition, with prices surging as demand outpaced supply due to supply chain disruptions.
A long-term shift in demand sources away from OECD nations towards Asia was accelerating and a global drive towards low-carbon energy sources had changed incentives for investors, deterring long-term investment away.
Demand for coal from the United States and European nations, particularly Austria, Belgium, and Sweden, has fallen at a rapid pace.
“In the short-term however, the Russian invasion of Ukraine is expected to delay some coal plant closures,” the report said. “Germany has closed nearly all of its domestic nuclear generation, making up the loss with imported Russian gas.”
“The need to secure its energy supply is expected to lead to scheduled coal plant closures being delayed, and could even lead to some closed plants being temporarily re-opened.”
As conditions return to normal, the Newcastle benchmark price for thermal coal is expected to ease from a peak of US$184 (A$244) a tonne in 2022 to around US$60 a tonne in 2027.
Demand for metallurgical coal, primarily used to make steel, has also fallen as China curbs its steel production. However, India, Japan, and Korea have seen a pickup in their steel production.
Recent catastrophic flooding in Queensland and New South Wales, where most of this coal is mined, is expected to cause further disruptions in mining and transport.
Similarly to thermal coal, the price of Australia’s premium metallurgical coal is forecasted to fall from an average of over US$300 a tonne in 2022 to almost half as supply conditions return to normal in 2023.
Australia is the world’s largest exporter of metallurgical coal and the second-largest exporter of thermal coal behind Indonesia.
Meanwhile, the European Union has proposed to ban Russian coal in response to alleged war crimes, a move that is likely to further increase demand for Australian coal.
However, significant supply-side disruptions remain in Australia, particularly labour shortages, restricting the ability of miners to raise output.
Australia has already been bombarded with calls for coal since the Russian invasion began, with many European countries heavily reliant on Russia for energy supplies.