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After falling in 2020, spot prices for thermal coal rebounded throughout 2021. They spiked in the second half of 2021, as supply was unable to ramp up quickly enough to meet the first-half’s big jump in demand, particularly in China. Higher natural gas prices drove coal prices up further. In October 2021, Newcastle free on board (FOB) thermal coal with a calorific value of 6 000 kcal/kg was trading at USD 253/t. The Argus/McCloskey’s Coal Price Index1 (API) 2, which tracks cost, insurance, and freight (CIF) prices, followed a similar trend and reached an unprecedented USD 260/t. In response to shortages, China boosted coal production in the second half of 2021, and by the end of the year, coal prices were easing.

In January 2022, in response to domestic shortfalls as producers focused on higher-priced exports, the Indonesian government immediately suspended exports, causing prices in the Asia-Pacific region to rise back to the levels of October 2021.

Russia’s invasion of Ukraine and the resulting sanctions against Russia drove coal prices to a new all-time peak in March 2022. European thermal coal prices caught up again with Australian prices, while Chinese import prices were less affected owing to lower demand and enhanced domestic production following the government’s guidance. With the end of the heating season in the Northern Hemisphere, global seaborne thermal coal prices eased slightly in April. Still, European efforts to reduce energy imports from Russia kept a floor under prices.

Flooding in Australia hindered coal production and transport, pushing Newcastle FOB prices to an all-time high of USD 425/t in May – a third record within eight months and nine times their level in September 2020.

Russia reduced gas flows to the EU during the second quarter of 2022, raising fears it could cut them off completely. This prompted European energy companies to buy more coal and push prices up further. Subsequently, API 2 coal prices hit a new all-time high of USD 425 /t in June. 

At the same time, Chinese import prices for thermal coal decreased slightly as higher production and moderate demand led to lower import volumes. In addition, Chinese companies, like those in various other importing countries, are buying Russian coal at discounted prices.


Thermal coal price markers, 2020-2022

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In response to Russia’s invasion of Ukraine, the United States announced a ban on Russian coal imports in March. The European Union, the second largest importer of Russian coal after China in 2021, followed in April. Some Japanese and South Korean utilities also announced they would no longer buy Russian coal. Together, the EU, Japan and Korea accounted for about 40% of Russia’s 2021 coal exports. Although the EU coal embargo will not come into force until August, it immediately impacted spot prices. Russian coal prices decreased due to lower demand and trade obstacles, though increased competition pushed up prices from other coal suppliers. Russian coal at Baltic ports was sold at a 41% discount to ARA (Amsterdam Rotterdam Antwerp) prices in March, widening to a 67% discount in July.

While the import ban still weighs heavily on coal exports from the Russia’s Baltic ports and from Vostochny in the east, prices for coal at its Black Sea ports are about USD 40/t higher. The Black Sea ports mainly supply Türkiye, the Middle East, North Africa and India.

The global thermal coal market is expected to remain extremely tight in the third and fourth quarters of 2022 as the EU ban comes into force. The shift to Russian coal by major importers – including China, Southeast Asian countries and India – should balance markets to some extent but is limited by logistical bottlenecks in Russian eastbound rail freight capacity. 

European and Russian thermal coal price markers, July 2021- July 2022

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Coal traded in the Pacific Basin includes a wide range of calorific values (CV). Although different types of coal can substitute for each other to some degree, they each represent separate market segments.

In the second half of 2021, when supply was tight in China and India, prices in all market segments rose in parallel to record levels and then eased as Chinese imports fell by the end of the year. However, the current supply strains in Europe and Northeast Asia mainly affect high-grade coal prices, while Indonesian low-grade coal prices have remained almost unchanged since April 2022.

In June, the high-CV thermal coal market was so tight that it traded at a higher price than metallurgical coal, which has an even higher CV. This unprecedented phenomenon is a clear indication of the extraordinary situation in coal markets.

Marker prices for different types of Australian coal, 2021-July 2022

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Thermal coal FOB price markers for different qualities of coal, 2021 - July 2022

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The forward price curve of API2 (a price index for coal deliveries to Europe) shows strong backwardation. In other words, spot prices are higher than future prices, indicating expectations that prices will fall. However, long-term forward prices have significantly shifted upward in recent months. While the spot market peaked in March and June 2022 at very similar levels, prices for coal to be delivered in 2024 doubled over the same period. From the different forward curves, it appears that market participants believed market imbalances would be short lived when prices peaked for the first time in October 2021, but they are now anticipating that tight market conditions will endure. In March 2022, future prices were exceeding USD 200/t through mid-2023. Three months later, in July, coal swaps for 2024 were trading at USD 230/t. In the same period, future prices of gas (TTF, July 2024 contract) rose from USD15.9/MBtu to USD22.1/MBtu.

API2 spot prices and forward curves, 2021-2024

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Notes and references
  1. Index prices for international physical and derivative coal markets.