Modern Mining June 2022

COMMODITIES OUTLOOK

gradually from their recent peaks. Consensus fore casts for the coal price are a decrease to an average of $225/ton in 2022 and $150/ton in 2023. However, there is a large variance in this forecast given the number of factors that could influence prices. On the demand side, higher prices are expected to reduce demand from consumers while global economic growth is expected to slow as central banks tighten monetary policy in response to global inflation that is increasing at its fastest pace in over 40 years. If central bankers cannot manage a ‘soft landing’ for the global economy, this would reduce demand for all commodities including coal and could result in a global recession and a dramatic fall in prices. The development of the Russian war in Ukraine, and the impact of further sanctions from the European Union especially, on the Russian energy sector, are big unknowns. There is also the possibil ity that sanctions on Russian exports could remain long after the war as Europe wants to reduce its dependency on Russian oil and gas. This could further support the demand for coal in the short to medium term while the supply of alternative energy sources catches up. Policies to secure energy independence, espe cially in China and India, could result in an increase of local coal production in major markets and reduce export opportunities. This could contribute to pres sure on prices. Furthermore, there could be new Covid 19 vari ants that cause additional disruptions. The impact of the Chinese zero-Covid policy that resulted in new lockdowns in major economic hubs could have an impact on the demand and supply of commodities and products. Commitments to climate change policies and the adoption of renewable energy are predicted to reduce coal demand in the longer term and the move to renewables could be accelerated if the price of fossil fuels remains high for longer. However, coal is expected to remain the primary source of electricity for some time to come. 

country, exporting 366 mt in 2021 (roughly 29% of global exports) followed by Indonesia, Russia and the United States. Exports from Russia accounted for 15% of total coal exports in 2021 (210.6 mt). Russian coal was exported mainly to China (43 mt), Japan (22 mt), Republic of Korea (20 mt), Netherlands (15 mt) and Ukraine (13.6 mt). The trade sanctions against Russia leave a large gap to fill, although it is unclear at this time how much India and China, particularly, will reduce their coal purchases from Russia. Heavy rain and flooding disrupted coal produc tion in Indonesia during 2021, and in Australia during the first quarter of 2022. Climate change is expected to intensify and add to price volatility. Years of underinvestment in new coal mines or infrastructure are also contributing to the supply crunch. Coal exports from South Africa, for example, have declined over recent years because of the dif ficulties of getting the coal to the Richards Bay Coal Terminal via the rail service. In 2017, South Africa exported 83.5 mt of coal; this declined to 66.3 mt in 2021. Given the cyclical nature of commodities and the current abnormally high prices, as global sup ply increases coal prices are expected to normalise

Coal benefits from global market challenges

12  MODERN MINING  June 2022