The world’s coal producers including Tanzania are expected to suffer from decreasing prices, due to oversupply and weak demands, as major importers including China and EU are now expanding their renewable energies to meet the climate goal.

Market research firm BMI, a Fitch Solutions company, says thermal coal prices forecast for this year at an average of $135/t. 

According to the EU’s REPowerEU plan, the region aims to increase its renewable-energy target from 40 percent to 45 percent by 2030.

BMI says coal prices, which averaged $174/t in 2023, were around $135/t on July 20 and have averaged at $132/t in the year-to-date.

Over the long term, BMI expects thermal coal prices to average $130/t in 2025, then fall to $65/t in 2033, with an average of $98.50/t from 2024 to 2033. 

"While our forecast implies that we expect prices to remain supported over the coming months, it paints a significant departure from the yearly average of $358/t reached in 2022.

“Since the second half of 2023, buoyant coal supply and demand weaknesses have resulted in increases in coal inventories globally and sharp declines in prices since their 2022 highs," BMI says.

Key coal-consuming markets China and India continue to lead global coal production and growth by supporting increases in coal plant permits and directing State-owned miners to boost output.

BMI forecasts Australia to produce 303-million tonnes of thermal coal this year and states that output is likely to remain steady up to 2033.

"We forecast global thermal coal consumption to decline by 0.2 percent year-on-year in 2024, after displaying stagnant growth in 2023. On the other hand, we expect global thermal coal production to grow by 3 percent year-on-year in 2024, similar to 3.1 percent year-on-year in 2023. Together, these figures will lead to a wider global surplus of thermal coal in 2024,” BMI says.

Major importers such as China and India are pushing towards greater domestic production, ensuring weak import demand for this year.

In China, coal demand strengthened in 2023 but is showing signs of slowing down this year. Data from China’s customs authorities shows that total coal imports grew by 22.3 percent year-on-year from January to May, compared with a 101.7 percent year-on-year increase overall in 2023, reaching 311-million tonnes.

This rise in imports has not benefited Newcastle thermal coal prices, which ranged between $130/t and 160/t in the second half of 2023 and $115/t to $145/t so far this year. 

Severe droughts in 2023 drove China's increased coal imports, but BMI expects a La Nina weather event could reduce coal power demand owing to heavier rains.

Over the long term, China remains committed to coal, having emphasised its importance during the National Congress in 2022 and the Two Sessions meeting in March 2023. Developments in China will significantly impact on global coal demand, as China's power sector alone accounts for one-third of global coal consumption according to the International Energy Agency.

"Looking closer at demand, we expect Europe to drive global coal demand weakness in the coming months. Throughout 2022 and 2023, European markets have actively sought to diversify away from Russian energy resources following the start of the Russia-Ukraine conflict. While this led to a short-term rise in coal demand, the region managed to significantly increase its gas storage levels,” the research firm notes.

Mild winters at the end of 2022 and 2023, along with increased gas supplies, have capped European coal demand and prices since January 2023, driving the global price collapse. 

As of early July, EU gas storage levels are robust and are expected to reach the 90 percent fill target by the heating season.

Rising coal stockpiles and lower demand in Europe have led some market participants to resell excess inventory to Asia and Africa, putting further pressure on global prices.