June 11, 2018 - The coal sector is expected to remain “quite dynamic” over the next ten years, with a forecast of eventual rising prices despite a slowdown in production, a negative image and a strong push to clean energy, a new report by BMI Research shows.
Unpacking the global trends in coking and thermal coal production and consumption for the period 2018 to 2027, BMI forecasts that thermal coal prices will decline in 2019 before starting to rise steadily until 2027, while coking coal prices will decrease until 2021, when the prices will start to increase again.
The ‘Industry trend analysis: global forecast to 2027’ report indicates a short-term thermal price decline from an average of $89/t from 2008 to 2017 to an average of $80/t, owing to demand from emerging economies pushing the thermal market into steep deficits, along with a global push towards a low- carbon future, which will see more alternative sources of energy replacing coal, especially in developed markets.
Over the next decade, coking coal prices are expected to average $156/t, compared with the $165/t recorded over the preceding decade, owing to lower demand from a slowing steel industry.
However, BMI expects coking coal prices to increase from $145/t in 2023 to $165/t by 2027 and thermal coal prices from $80/t to $91/t over the same period.
Meanwhile, global coal production expanded at an average yearly rate of 2% from 2008 to 2017, with BMI now forecasting a slower growth rate of 1.1% from 2018 to 2027.
“Our forecasts show that both types of coal will see steady decreases in production growth, but thermal coal production growth will slow at a faster rate, from 2.6% year-on-year in 2018 to 0.7% year-on-year in 2027, than the production growth of coking coal from 1.6% in 2008 to 1% in 2027,” the report says.
This will be driven by prices, as coking coal prices increase more than thermal coal prices during the latter part of the forecast period.
Total coal consumption, which averaged a yearly growth rate of 2.2% in the past decade, will slow to an average rate of 1.8% year-on-year during 2018 to 2027.
During the second half of BMI’s forecast period, global coal consumption will grow at a faster average rate of 1.8%, compared with the first-half growth of 1.7% from 2018 to 2022.
This will be driven by stronger thermal coal demand from emerging economies, including Vietnam, Mexico and Zimbabwe.
During the decade under review, BMI also expects a deficit in both coal markets.
The global thermal coal deficit will increase fivefold from 181-million tonnes in 2018 to 912-million tonnes by 2027, in contrast to the coking coal market, which will see an average deficit of only three-million tonnes over the coming decade.
“This is because production growth will slow considerably over the coming decade, as major producers, including China and Indonesia, cut back on output because of depleting reserves and heightened environmental protection,” BMI notes.
“On the other hand, consumption growth, despite being slower than in the past decade, will edge higher to 2027,” the firm concluded.
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