Australian government predicts decline in coking coal prices

The Australian government expects lower metallurgical coal prices and exports in the 2023/2024 financial year (July-June). This is stated in the updated forecast of the Department of Industry, Science and Resources, released at the end of March.

Australia’s coking coal exports are expected to reach 161 million tonnes in the period, down from 166 million tonnes forecast in December 2023, as domestic production has only partially recovered. However, compared to the 2022/2023 financial year, it will increase by about 3.2%.

«Australian metallurgical coal production and exports have been limited in recent years by bad weather and logistical challenges. But demand factors have also played a role, including relatively soft steel production among some regional importers and continued low exports to China even after trade restrictions were lifted,» the department said in a statement.

At the same time, in its March report, the department forecasts Australian coking coal exports for FY2028/2029 at 175 million tons, as new mines in New South Wales and Queensland will increase production.

The Department of Industry, Science and Resources forecasts an average coking coal price of $277/t in 2024 (down from $298/t in 2023) and a decline to $185/t by 2029.

In the forecast period until 2029, prices for these raw materials will be determined, in particular, by the duration and severity of weather disasters caused by the La Niña cycle – the last one lasted three years. If it has a similar duration, coal supplies may be disrupted until 2026. Also, the agency noted, there is a risk of a potential escalation of the Russian-Ukrainian war, which could lead to a further reduction in exports from Russia.

Fitch Ratings expects the price of coking coal to reach $240/t in 2024 and $190/t in 2025. The previous forecast was $210/t and $180/t, respectively. The price assumption for 2026 remains unchanged at $170/t.