Thermal coal falls to lowest level in two years as climate policies take hold

HUNTER Valley coal prices have slumped by a quarter in the past year as a number of Asian countries move to reduce their reliance on coal for electricity generation, a leading industry journal, the Australian Coal Report, has confirmed. Read more here

But while prices are well down, the latest Hunter Valley Coal Chain Coordinator's report shows that export volumes have fallen by just one per cent this year, down to 65.5 million tonnes at the end of May, compared with 66.2 million tonnes at the same time last year.

The June 4 edition of ACR shows the industry-standard McCloskey 6000 kc (kilo-calorie) index for Newcastle thermal coal was $US77.63 in the last week of May, down from $101.60 a year ago, a fall of 24 per cent.

Coal is sold in $US, and a steady slide in the Aussie dollar over that time - from $US0.75 to $US0.69 presently - means the price in $A went from $135.40 to $112, resulting in a less dramatic fall of about 17 per cent.

ROLLER COASTER: Five-year graph of Newcastle thermal coal price, showing the present decline, in this measure, to the end of April. Source: Index Mundi

ROLLER COASTER: Five-year graph of Newcastle thermal coal price, showing the present decline, in this measure, to the end of April. Source: Index Mundi

Although a lot of attention is paid to the high-energy 6000 kc price, a substantial amount of coal sold through Newcastle has a lower energy rating and sells at a lower price.

But the McCloskey index for high-ash 5500 kc coal has also fallen by 24 per cent, going from $US74.29 a year ago to $US56.72 last week.

The industry has said that an Asian push to burn better quality coal will help Australian producers, but the latest edition of ACR indicates that this is not always straightforward.

The journal noted that Taiwanese power stations been buying more high energy Australian coal (most if not all of it shipped from Newcastle), going from 29.6 million tonnes in 2014 to 34.3 million tonnes last year.

It said Taiwan had "ambitious" plans to shift to a lower carbon economy - cutting coal's share of electricity generation from 46 per cent today to 30 per cent in six years time - and phasing out its nuclear power stations.

"It is in [Taiwanese power company] Taipower's interest to buy really, really high calorific value coal," one Taiwanese industry source told ACR. "They want high [calorific value] but the system doesn't allow them to buy that because it doesn't evaluate well [meaning it costs more]."

On the market in general, ACR said: "Newcastle benchmark 6000 kc pricing is under sustained pressure, tracking weakness in global coal prices, amid a supply overhang and reduced demand from key markets, including Japan."

Japan remains Newcastle's major customer, taking 49 per cent of the coal trade so far this year, a figure in line with long-term trends.

THE GREAT CHANGE: This 30-year graph shows a relatively steady coal price until 2003, with wild gyrations - and a substantial increase in the average price - over the past 15 years. Source: Index Mundi

 THE GREAT CHANGE: This 30-year graph shows a relatively steady coal price until 2003, with wild gyrations - and a substantial increase in the average price - over the past 15 years. Source: Index Mundi

And while the present round of price falls may have bought the Newcastle index to its lowest level in two years, prices are still well above where they bottomed out in 2016 at under $US50 a tonne.