A Snapshot of the Market in 2025 and Beyond
The global metallurgical coal market is poised for an interesting phase as it recovers from significant lows in 2024. After a sharp drop, metallurgical coal prices have stabilized above US$200 per metric ton in October and November 2024, and are expected to maintain similar levels through the forecast period. Despite this price stability, export earnings are predicted to decline. This is due to the ongoing price softness compared to the high levels witnessed in 2023, as prices are expected to average US$205 per metric ton through 2025 and 2026. However, global trade volumes are set to rise, with export volumes increasing from 151 million metric tons in 2023–24 to 174 million metric tons by 2025–26. This will be mainly driven by rising demand from countries like India and Southeast Asia, but the reduction in export earnings reflects the impact of price drops on overall revenues. A shift in the dynamics of metallurgical coal trade is evident as global producers and consumers adjust to new pricing realities and market demands.
Trade and Supply Chain Developments
Metallurgical coal trade volumes showed encouraging signs of growth during the first eight months of 2024. Global trade increased by 9% in comparison to the same period in 2023. China continued to be the largest importer of metallurgical coal, although it faced challenges in its steel sector, particularly with shrinking profit margins in steel production. Nonetheless, China’s demand for metallurgical coal remained steady, and coal imports from countries like the United States and Australia surged during this period. This trend represents a shift from previous years, where Mongolia dominated the Chinese import market. The rise in imports from the US and Australia can be attributed to price fluctuations and China's ability to purchase coal on spot markets when conditions were favorable, providing significant opportunities for the largest coal exporters.
Despite temporary slowdowns in some regions, India’s long-term demand for metallurgical coal is expected to rise. The country's planned capacity expansions for blast furnaces and other steel production facilities remain a core driver of growth in the global metallurgical coal trade. However, short-term challenges such as the monsoon season, global oversupply in steel, and delays in the Indian government's infrastructure projects slightly dampened Indian import volumes in mid-2024. Importers in India also faced shifting market conditions, particularly in response to price changes. India's growing steel output and its increasing diversification in coal sourcing have changed the regional dynamics of metallurgical coal imports. Russian and US coal exports gained significant market share, while Australia’s share decreased slightly, from 49% in 2023 to 44% in 2024.
Price Recovery and Market Volatility
Metallurgical coal prices witnessed a sharp drop in the third quarter of 2024, falling as much as 44% from 2022 highs. However, prices began to recover in late September, rising from US$180 per metric ton to US$205 per metric ton by October. This recovery was largely driven by Chinese government policy measures that helped stabilize the domestic steel market, reducing fears of continued negative profit margins in the steel manufacturing sector.
The short-term rally in prices was also influenced by the response of high-cost US mines, which cut production as a reaction to falling prices. These price fluctuations reflect the ongoing volatility in the global metallurgical coal market, which is primarily driven by sentiment and shifts in supply-demand balances. As most coal trade happens under long-term contracts, spot market trading has been more influenced by market speculations and geopolitical events rather than actual demand from end consumers.
The forecast for metallurgical coal prices remains uncertain, as fluctuations in supply and demand patterns are expected. Although prices are predicted to average US$205 per metric ton through 2025 and 2026, there are significant risks in the market. Geopolitical tensions, fluctuating steel market conditions, and shifting trade policies could all lead to price volatility. The global coal market continues to adjust to these changes, and the impact of external factors will likely shape market prices over the coming years.
Global Supply Risks and Geopolitical Considerations
The risks associated with supply disruptions have moderated since the September 2024 Resources and Energy Quarterly, largely due to a weak La Niña weather pattern. Meteorological agencies report that the La Niña pattern, known for causing weather disruptions, is expected to be weak and short-lived. This decreases the risk of supply disruptions on Australia's east coast, a major global coal-producing region. However, some risks remain, notably in Russia, which accounts for 11% of global metallurgical coal supply. Russian coal exports have been stable, but geopolitical tensions related to the ongoing Russia-Ukraine conflict continue to cast uncertainty over Russian exports. Despite these challenges, Russia's export volumes in the first eight months of 2024 were 15% higher than in 2023, though logistical constraints, such as rail transport limitations, are an ongoing concern.
To mitigate these issues, Russia is working on expanding its infrastructure. A new Pacific railway is expected to open in 2025, offering an alternative route for transporting coal to international markets. This could ease some of the logistical bottlenecks that have hindered Russian coal exports in recent years. However, geopolitical risks and trade sanctions will continue to affect the Russian coal industry, limiting its potential growth in global markets.
Demand Uncertainty and China's Role
China’s demand for metallurgical coal is under scrutiny due to recent changes in its steel sector and broader economic conditions. While China still consumes approximately half of the world’s metallurgical coal, its domestic steel consumption has declined in recent years. Moreover, trade policy changes, such as anti-dumping investigations into Chinese steel exports, are also complicating the outlook for coal demand. These uncertainties, combined with protectionist policies in global trade, pose a risk to future demand growth from China. Although Chinese steel mills have maintained higher capacity utilization rates in recent months, the outlook remains mixed, and much of China's future coal consumption will depend on how domestic production issues and international trade policies evolve.
While India’s steel sector is expanding rapidly, this growth may not fully offset the slowdown in China’s demand. India’s metallurgical coal imports, though slightly slowed in recent months, are expected to continue growing in the medium to long term, backed by steel production expansions. India’s increasing imports from countries like Russia and the US, along with a diversified coal sourcing strategy, will play a central role in shaping the global coal market.
Export and Import Dynamics in 2025
Looking at global trade dynamics, Australia’s exports are set to increase, although these additional volumes are unlikely to fully replace losses from other regions. The growth in demand from countries like India, Southeast Asia, and other emerging markets should absorb these additional supplies, ensuring that Australian coal exports remain competitive on the global market. On the other hand, Mongolia saw a decline in its coal exports in 2024, particularly during the September quarter, as Chinese demand shifted towards the US and Australian suppliers during periods of price volatility. Despite this short-term contraction, Mongolia's coal export levels remain high compared to historical standards, thanks to capacity expansion in recent years. However, Mongolia faces competition from other regions with lower freight costs, such as Russia and Australia.
In contrast, Russia has faced few challenges in maintaining export volumes in 2024, with coal exports to China and India remaining strong. Russian coal is traded at a discount, and this pricing strategy has helped maintain its market share despite logistical and political barriers. The Russian government has been taking measures to boost coal exports, including the cancellation of export duties on coking coal, which will help support coal enterprises.
Price Trends and Future Outlook
The price trends for metallurgical coal are expected to continue fluctuating in the coming years, influenced by several external factors. Contract prices for metallurgical coal are forecasted to decline from US$254 per metric ton in 2024 to US$205 per metric ton by 2026, while real prices adjusted for inflation will follow a similar downward trajectory. However, spot market prices, which are generally volatile, remain a crucial aspect of global trade dynamics. The forecast for spot prices indicates a similar trend, with nominal prices declining from US$244 per metric ton in 2024 to US$205 per metric ton by 2026.
The market will remain susceptible to geopolitical influences, economic shifts, and supply-side constraints. While Australian coal continues to dominate global trade, the emergence of new export sources like Russia and the US is changing the dynamics. As prices fluctuate, there is a growing concern about price volatility due to market illiquidity and shifting trade policies. Despite these uncertainties, metallurgical coal remains a vital commodity in the global steel production process, with significant trade flows expected to persist.
