Coal Expert forecast coal market in 2021

This year coal prices break the record at the lowest level since 2016. This significant drop was driven by low market activity and production fall in the industrial segment. But looking ahead the market’s indications are positive.

We are talking with ICI Suisse SA representative Nickolay Martynenko.

“It’s been a challenging year for coal and anthracite producers. The price for Australian coal fell by 24% in August, compared with the same period of 2019, reaching a four-year low of $50.14 per tonne. On the other hand in September and October, we have seen a positive dynamic trend and recovery for 9% and 7% respectively in month count,” said Nickolay Martynenko.

According to him, the situation in the coal segment is the most unpredictable in comparison to other energetic fields, due to coal being significantly dependent on the energetic and metallurgical sectors of the economy.

“Saying that in China and India coal is the main energy source, and the countries are second and third largest energy consumer in the world. In these countries alternative energy sources: hydro-energy, solar energy, wind energy, in 2020 possessed leadership due to much lower variable costs,” said Nickolay Martynenko.

The expert also emphasized the stagnating situation in the metallurgical sector of the economy, where coal of anthracite grades is one of the main raw materials.

“In 2020 demand for steel products decreased by another 2,4%, in well-developed economies like EU and North America for 15%, according to WSA research. This decline could be worth if not the Chinese government stimulations (in form of issuing government bonds for the amount of 1 tr. Yuan). For the first time in 11 years in June 2020 China became a net importer of steel products,” the ICI Suisse representative said.

However, according to him, since October the standard winter restrictions for industrial production, lasting till March 2021, would influence negatively the world economy globally.

The tough relations between Australia and China pushed down the prices for coking coal at the end of 2020.

“Unofficial ban on premium low-ash coking coal from Australia, imposed by the Chinese government in October 2020, decreased the Australian benchmark by 25%. This may have long-term consequences, as China covers 80% of domestic requirements for this coal grade,” Nickolay Martynenko mentioned.

Nevertheless, there’s a chance for the industry to recover next year, according to the ICI Suisse SA representative.

“U.S. Department of Energy, IMF, and World Bank expect the industry to recover by 2021. The market players’ general upcoming 5 years forecast is moderately optimistic. Everybody expects the coal price fix for 5-10% depending on grade and designation,” Nickolay Martynenko said.