Pacific basin benchmark Newcastle coal prices will likely average USD 85.70/t this year, down 4.2%, or USD 3.80, from previous estimates, due in part to renewables expansion, said economic analysis firm FocusEconomics.
Prices in 2020 would average 3.2% less, or USD 2.70 down, than forecast last month, at USD 81.60/t, said the firm, whose assessment is based on an average of projections by 12 economic forecasters.
The Global Coal Newcastle index has so far this year averaged USD 87.25/t, with a latest assessment at USD 75.74/t.
“Although prices for Australian thermal coal rose strongly at the outset of July, the increase is expected to be short-lived, due to weak demand from Asia amid a push towards cleaner energy sources,” the firm said.
“A global move towards renewable energy has also reached Asia, which is a key export market for Australian thermal coal.”
FocusEconomics noted, in particular that Japan – Australia’s main customer for the commodities – was expected to move towards cleaner energy at a quicker pace than previously anticipated.
“[This] will hit thermal coal demand,” it said, pointing to cancelled plans for two new Japanese coal-fired power plants and the prospect of a third being axed.
“Moreover, the industrial sector in China, which is the second biggest export market for Australian coal, entered a rough patch towards the end of the second quarter,” it said, noting industrial output growth posted the lowest reading in nearly two decades in May, while the June manufacturing PMI fell into contractionary territory amid lingering tensions with the US.
“Going forward, however, prices for thermal coal are expected to pick up slightly from their current levels as supply tightens,” the analysis firm said, adding large mining companies were “less hungry” to expand thermal coal production, owing to the global move away from the “polluting” commodity.
“On the other hand, the phasing out of the fossil fuel is a downside risk to the price outlook as coal usage could drop at a quicker rate than expected,” it added.News Source: Montel