Debilitating coal prices are great for coal consumers, but tragic for coal miners around the world. Reports from Bloomberg suggest that the falling coal prices this year have hit coal miners in Indonesia tremendously, the market being one of the largest producer and exporter of coal to the world. In the past year, the value of coal originating in Australia has dropped 66 percent. Due to the slump, several coal supplying companies have shut down or have gone bankrupt.
Coal consuming plants should be stocking up, especially importers that could be getting better margins on production. Prices had improved last July reaching $120 per ton for Australian coal Brent and since Aug-19, they have halved and proceeded to fall further.
Demand coming from China has particularly been weakening over the past several quarters as the country has been reducing its imports as well as shutting down its own old plants partly due to its efforts to protect its deteriorating environment and has been cutting down coal production as well as imports. Another reason is due to China’s ongoing trade with the United States which continues on and has only exacerbated demand coming from China. Other markets such as India and European economies are moving away from coal and leaning toward natural gas and renewable energy. India’s coal capacity has also become much higher than its peak demand. High coal reserves and low consumption has managed to bring global coal prices down to its bottom since 2016.
China has announced its annual cap at 300 million tons and intends on importing no more than that as it remains committed to its environmental protection policies. The country is mindful of protecting its own coal miners faced with reduced demand by reducing imports coming from competing markets. Coal consumption is not expected to rise too much which may keep prices at their current lows.
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