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IEEFA: Cost inflation underlines thermal coal miners’ fragile profits and financing risks

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World Coal,

Andrew Gorringe, Coal Sector Energy Finance Analyst, IEEFA, has published key findings relating to recent Australian thermal coal trends.

The July 2023 coal market update from the International Energy Agency (IEA) describes strong international demand for coal use for thermal energy, concentrated in major regions of China and India, and to a lesser extent in Indonesia – but not the high-energy coal markets that Australian producers target.

As the world’s second largest thermal coal exporter, Australia’s producers have now recovered from flood-constrained production over the past year and are poised to increase output. Across New South Wales (NSW) and Queensland there are at least 23 coal mine projects under consideration that involve expansion or extension of thermal coal production.

However, trends revealed in the latest reporting results indicate that profits are fragile and opportunities to bankroll expansions are declining.

The IEA highlighted that thermal coal prices have returned to more normal levels after 18 months of high prices and volatility. Indeed, the high premiums for Australian coal achieved in 2022 have now receded.

  • NSW Minerals Council’s CEO Stephen Galilee has said that: “Coal prices have fallen dramatically since the record highs of last year, and are expected to fall further over time. Since 2020, coal production costs have significantly increased.”
  • KPMG’s latest consensus coal price forecasts indicate that the outlook remains on a downward trend.
  • Australia’s Office of the Chief Economist expects the price to be US$120/t by 2025.

To read more of Andrew Gorringe (Coal Sector Energy Finance Analyst, IEEFA)’s analysis and IEEFA’s July 2023 coal market update click here.

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Australia coal news New South Wales coal news