Sanctions to keep coal market tight in 2023 – Montel

(Montel) Western sanctions on Russia were likely to keep the global coal market tight this year despite improving output among alternative suppliers, Montel reports citing Australian miner Whitehaven.

“We continue to see end users focus on longer term energy security requirements, with significant interest for high CV thermal coal from April 2023 onward,” Australia’s leading producer of high-grade export coal said in a production report.

Whitehaven averaged record prices of USD 382/t over the last six months as the geopolitical tension continues and western retaliatory sanctions on the world’s third largest coal exporter shocked energy markets.

The disruption coincided with a La Nina weather cycle that doused Australia’s eastern coast mines with heavy rainfall and disrupted logistics. This helped to send exports out of the key Newcastle hub 20m tonnes lower last year to 136m tonnes and almost a fifth below their 2019 peak.
 
A mild northern hemisphere winter had left coal stocks elevated in Europe and Asia, helping to depress prices recently, Whitehaven said. Global Coal’s Newcastle index last stood at roughly USD 350/t, down from a record of almost USD 466/t last September.  

Yet recovering demand would meet only a limited rebound in supply, the miner said.
 
“We continue to see strong demand for high CV coal and tight supply, particularly with the sanctions/bans on Russian coal to Europe, Japan and some segments in Taiwan.”

Improving weather conditions, given the expected end of La Nina by February, would help the company return production to more normal levels, it said.

Whitehaven expects to produce 19-20m tonnes of coal over its financial year through to the end of June, in line with its previous guidance. It produced 8.8m tonnes over the last six months.

“Constraints due to a challenging labour market will continue to have an impact. Nevertheless, mine sequencing plans allow for opportunities to lift volumes in the second half, underpinning our expectation of meeting overall volume targets.”

Coal prices were likely to fall this year relative to last year as supply disruptions wane across major producers, according to Swiss investment bank UBS. Yet it also expects prices to remain supported above USD 150/t for the next two-three years until another wave of LNG supply ramps up.