Financial Times reported that the price of thermal coal has surged in the past two months as key consumers in China, India, South Korea and Japan rushed for supplies. Since the start of November, high energy Australia coal, the benchmark for the vast Asian market, has climbed 45% to USD 80 a tonne, while its South African equivalent is up 65% to about USD 100 a tonne. Several factors are at play. First, the seaborne thermal coal market is tight. About 25 million tonnes of Colombian production has been curtailed this year in response to weak prices and there is no fresh supply coming on stream as banks and investors refuse to finance new mines. At the same time, demand in Asia has started to pick up owing to the region’s economic recovery and more recently a cold snap. In China, where domestic production has not been able to match supply that has led to soaring prices a supply crunch and a search for imported coal. However, that has been complicated by an unofficial ban on Australia coal due to a diplomatic spat.
As a result, Chinese buyers have turned to producers in Indonesia, Russia, and even South Africa, which they have not imported from since 2016 due to impurities in the coal.
Higher China demand has pushed up the price of Indonesian, Russian and South African coal, allowing Australian producers to push material into less traditional markets of Bangladesh, Turkey and India.