December 2, 2024 - Rising coal consumption – both global and domestic – may support US thermal coal markets in 2025, multiple US coal miners said.

"Demand for thermal coal continues to grow, and this growth is Asia centric," Peabody Chief Marketing Officer Malcolm Roberts said in Peabody's third quarter earnings call.

Asia has boosted thermal coal imports compared with last year with India imports rising by 12% and China by 8%, Peabody said.

Global coal demand is expected to persist through the coming years, even amid energy transition. The International Energy Agency recently revised its 2030 global coal consumption forecast upwards by 6%.

"To put this into perspective, the 2024 increase on forecast demand is comparable to the total coal consumption of Japan," Roberts said.

Coal analysts at S&P Global Commodity Insights projected that US thermal coal exports will increase to 55 million st in 2025. The US Energy Information Administration forecasted that aggregate thermal and metallurgical coal exports will total 104.4 million st in 2025, compared with 107.6 million st in 2024.

The top five destinations for seaborne US thermal coal exports from January through October 2024 were India at 10.4 million mt; Morocco, 4.3 million mt; Egypt, 3.4 million mt; China, 3 million mt; and Japan, 2.3 million mt, according to S&P Global Commodities at Sea data. Other leading destinations were the Netherlands at 1.7 million mt and the Dominican Republic at 1.1 million mt.

Despite the possibility of stronger export demand in the near term, North American FOB coal prices have declined from October to November. Platts, part of S&P Global Commodity Insights, assessed FOB West Coast North America 5,750 kcal/kg NAR coal at an average of $97.71/mt in the first half of November, compared with $98.85/mt for the full month of October. The FOB West Coast North America price was flat on the session Nov. 15 at $96.85/mt, based on the Platts NEAT price at $113.54/mt minus Panamax shipping from Roberts Bank, British Columbia, to Japan, at $16.70/mt.

In addition to markets in Asia, European coal importers like the Netherlands and Germany are also important end users. Pennsylvania coal miner CONSOL Energy said that they are starting to see an uptick in European thermal coal demand with buyers securing cargoes for winter. European coal inventories are low and concern over natural gas supplies persist, CONSOL said.

"I think winter weather certainly is going to be a determining factor [in Europe]," CONSOL Vice President of Marketing and Sales Robert Braithwaite said. "I will also tell you that we've contracted over 400,000 tons last quarter into Europe. We're starting to see certainly some desire."

The price for coal delivered into Europe is impacted by changes in the price of natural gas, which rose in November due to increased power demand caused by colder temperatures.

"Escalating tensions between Russia-Ukraine after Ukraine's drone attacks on Moscow also contributed to the bullish move," Commodity Insights coal analysts said in the November US Coal Market Forecast.

Platts assessed the European delivered coal price CIF ARA 6,000 kcal/kg NAR coal at an average of $11.99/mt in the first half of November, compared with the full month of October average at $118.42/mt. The coal rose to $125.30/mt on Nov. 15, which was a seven-month high.

Arch Resources, a St. Louis-based miner that ships thermal coal to destinations like the Netherlands, China, and Japan, said that it expects demand for thermal coal to continue into the long-term future.

"West Elk fits clearly in our strategy of pursuing high-quality seaborne thermal business," Arch CEO Paul Lang said. "West Elk is going to be a big player in that business for the next 10 years plus."

The composition of West Elk coal is nearly 12,000 Btu/lb and very low in sulfur, making it among the highest ranked US seaborne coals, according to Arch. Arch primarily exports its coal from the Gulf Coast port of Houston, according to CAS data.

In the Gulf Coast FOB coal market, Platts Nov. 15 assessed FOB New Orleans 6,000 kcal/kg NAR coal at $70.30/mt, based on market fundamentals and broker indications of value at $75/mt and $68.50/mt. The coal averaged $75.28/mt through the first half of November, compared with $76.64/mt for the month of October.

In addition to Asia and Europe, demand from North Africa could also impact US thermal coal markets in 2025. After India, Morocco was the top destination for seaborne thermal coal exports from January through October 2024 at 4.3 million mt. Shipments bound for Morocco were loaded from both East Coast and Gulf Coast ports, CAS data showed. US exports to Morrocco surged in 2024 and by September had passed full year 2023 exports of 3.5 million mt.

Some miners, including CONSOL, can also benefit from selling their thermal coal as crossover metallurgical coal into seaborne markets, when the price is right. When demand for thermal coal is low in traditional markets, some thermal coal products can trade into other markets and achieve higher realized prices because of it, according to Senior Analyst at S&P Global Commodity Insights Wendy Schallom.

"Indian demand for NAPP coal has softened due to prolonged monsoon season and lower petcoke prices," CONSOL CFO Miteshkumar Thakkar said. "However, demand for our crossover metallurgical product has been robust this year, particularly in China and Southeast Asia."

Amid softer demand from India, US NAPP coal prices fell from October to November. The FOB Baltimore 6,900 kcal/kg NAR price averaged $79.20/mt in the first half of November, compared with the October average at $80.43/mt. Platts Nov. 15 assessed FOB Baltimore 6,900 kcal/kg NAR coal flat on the session at $75/mt, based on market fundamentals and broker indications of value at $75/mt.

In addition to India, China is a major consumer of both thermal and metallurgical coal from the US. New stimulus measures in China may support demand for US coal in the near term, Class I Railroad CSX said.

"I think the natural price for coal is probably going to stabilize above where it is today, and that gives me hope that we'll see better pricing environment going forward," Kevin Boone said. "Certainly, what you've seen here recently is a China stimulus, and that's been the talk, right?"

In the November International Thermal Coal Market Forecast, Commodity Insights increased their projection for 2024 China thermal coal imports, noting the impacts of policy on coal demand.

"The strong China power demand and constrained domestic supply has kept China thermal coal imports elevated in 2024. Considering the most recent economic stimulus and the need to ensure energy security during potentially harsh conditions in winter 2024-25 winter (due to the impacts of La Nina), we have upgraded our China thermal coal imports forecast for 2024 to 390 million mt. This is an increase of 36 million mt year over year," Senior Analyst at S&P Global Commodity Insights Pat See Khoo said. 

Domestic Coal Outlook 

CONSOL Energy noted long-term opportunities in the US domestic coal market, with some customers seeking to procure volumes as far out as 2028.

"Domestic power demand growth is expected to accelerate due to data center buildouts and EV growth," Thakkar said. "This has led to additional potential delays in coal plant retirements."

In 2024, coal units in Maryland, Indiana, Wisconsin, and Utah extended their retirement dates to 2036 or 2038, according to S&P Global Commodity Insights. Retirement delays have been announced in PJM, MISO, and WECC, as generators aim to meet rising demand and to improve their reserve margins.

"I believe people are starting to get concerned about the reliability of the grid," CONSOL CEO James Brock said. "If [demand] grows at even half the pace that everyone is expecting, then I think you'll see these coal-fired plants run at least at a higher capacity and may even extend their retirements further."

The US Energy Information Administration said it expects US electric power sector coal consumption to increase 0.4% on the year at 371.7 million st in 2025.

In addition to electricity demand growth from data centers and other sources, higher natural gas prices are expected to support US domestic thermal coal demand in 2025. Commodity Insights projects that natural gas prices will increase to $4.26/MMBtu in 2025, and $6.29/MMBtu in 2026, contributing to an increase in thermal coal consumption of about 40 million st per year (projections based on normal weather).

Domestic coal prices remained fairly stagnant in 2024 on the back of higher utility coal stockpiles and low natural gas prices. Prompt-month Central Appalachia 12,500 Btu/lb CSX rail coal averaged $73.34/st in the first half of November, compared with $73.39/st in October. Platts assessed Central Appalachia 12,500 Btu/lb CSX rail coal at $73.50/st on Nov. 15, based on broker indications of value at $72/st and $75/st.

"We believe coal producers are already working to match current production with growing demand from increased large industrial loads expected moving into 2025 and 2026," Senior Analyst at S&P Global Commodity Insights Wendy Schallom said in the Commodity Insights November US Coal Market Forecast. "While it doesn't change the long-term outlook for thermal coal demand and ultimately supply in the US, it does extend the transition period as US coal generators push back on previously announced retirement dates and the competition between coal and natural gas continues."

Utilities are working to build their energy portfolios in a way that balances both reliability and sustainability, and coal will continue to be part of the conversation in many electricity markets.