Target $18.72, page-9340

"My educated guess is that the spike to $400USD/t was caused by a perceived lack of supply. Once realised that supply is fine, the price has dropped back ~$130USD/t. Over the last ~10 or so years, the coal price has ranges from about $50USD/t to about $130USD/t, so the price is back to 'normal'. I don't think we'll see those record high prices for a long time. The supply is fine."

Your ...er...educated guess is little more than making stuff up, when the facts of the matter, which show your view to be false, are readily available at your fingertips.

The reason the price went to US$400/t in 2022 was not due to a mere perceived lack of supply but because there was a very real lack of supply relative to demand. This was due to a combination of three factors:

1.) Low system inventories in 2020/2021 (right across the chain: producers, ports, seaborne and power plants), as stocks had been run down due to Covid-induced capital conservation.

2.) Rapid recovery in global industrial production (averaged at an annualised rate of almost +5.5%pa in the 18 months to mid-2022)

3.) A ban on exports in late 2021 by the government of the world's largest seaborne exporter by far, namely Indonesia, until stockpiles at domestic power utilities were rebuilt, which resulted in a ~10% reduction (equivalent to around 45mt to 50mt) in each of 2021 and 2022 from Indonesia's rated export capacity. In a global seaborne market which is some 1.3bn tonnes in size, to have almost 4% of supply to it disappear at a time that demand is rising by more than 5%, is a very significant delta.

So, not a perceived delta, but a very real one, so much so that at the time there were cases of power plants even participating in the coking coal spot market, which they blended with ultra-low CV brown coal.

Fast forward to today and we have the opposite happening: global industrial output has been negative/stagnant for the past 12 months (courtesy in no small part to tightening monetary conditions globally and a Chinese real estate market under pressure):




.... while exports from Indonesia, the market's low-calorific value, swing supplier, have rebounded by more than 25% (from $390mt in 2021 to almost 500mt... clearly, a 100mt supply variance in a 1.3bn tonne market is non-trivial).



So, a perfect storm for coal markets over the past 12 months, with supply and demand being out of phase.

And yet, despite the marginal swing supplier having increased exports with gusto at a time that demand conditions are cyclically muted, the coal price today is still at a level that matches the peak levels of previous cycles.

Historically, if the adverse confluence of supply-demand events were as they are today the coal price would be closer to US$50/t, reflective of previous cycle troughs, instead of US$130/t (i.e., equivalent to previous cyclical highs).

So, no. Demonstrably, contrary to your flawed assertion, supply is not "fine".
The market remains tight.

Coal is a globally fungible economic good and is priced on the marginal propensity of demand and supply.

Meaning it doesn't take much variance on the supply or demand curves to move the dial significantly. Just a modest positive demand recovery or a very small supply-side hiccup will do it.

Imagine what is going to happen when the inevitable cyclical recovery in global industrial activity occurs. From where is the marginal supply tonnage going to come?


The 2021 investment thesis, of global coal markets being fundamentally undersupplied, due to the demand curve continuing to move to the right while the supply curve is being constrained, is still very much intact:

https://hotcopper.com.au/posts/53454533/single


This structural imbalance has been more than a decade in the making; it doesn't magically fix itself due to some temporary short-term cyclical factors.

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