Coal is crucial for generating power and making steel. So it’s no mystery as to why Australia is one of the biggest suppliers of the commodity. However, the future of Australia’s coal industry is up in the air. There are several things that could lead to a downfall: environmental concerns, technological advancements, and intense politics. Here, we will dive into what 2024 looks like for coal on a national and global scale.
Global coal market outlook for 2024
The International Energy Agency (IEA) says global coal demand will remain stable. It’s expected to hold steady at about 8.4 billion tonnes (bt) in 2024, give or take a bit. This comes after reaching a peak of 8.5 bt in 2022, and even with that it masks major differences throughout the world. Although coal demand is predicted to increase in developing markets, the IEA says it should decline in advanced economies. The European Union and North America are both anticipated to see their consumption drop by over 20% and 40%, respectively.
Electricity generation and steel production are the two main reasons why coal demand is still happening today. Together they make up for over 90% of global consumption. The IEA does expect that power generation from coal will shrink by half a percent per year between now and 2024 as more renewable sources get used around the world. That being said, coal will still be king when it comes to electricity generation in three years time with a share of one third followed by natural grass at 24% and renewable energy at 23%. As for steel, an increase of 1.5% is projected each year over this same period due to high demand from India and China.
Of course, the supply side also has a huge impact on this market too as it relies on availability costs and quality of resources amongst other things like environmental impacts from mining them out of the earth. The IEA thinks global production will rise by around one percent per year within these two years, making it reach 8.6 bt in four years’ time. A good bit of contributors to this growth include places like Australia Indonesia Russia and South Africa who make up over half of exports worldwide for this mineral resource that’s said to vanish soon just based off what we’re seeing right now. However, there is warning attached to this where we could face some obstacles in the future which include low productivity and rising costs.
The global coal market is also affected by other factors external to its own operations like price movements. When compared to natural gas and oil it may be safe to say that coal prices are scary. The IEA says in recent years it’s been really unpredictable due to things like weather events supply disruptions demand shifts and policy changes. As we’ve seen in 2021, prices skyrocketed to record highs because of China and India, Australia and Indonesia. On top of that there were low inventories across Asia. However, they’re forecasted to go down soon enough as supply conditions loosen up a bit and demand growth slows down.
Factors driving demand for Australian coal
In 2021/22, Australia exported 204 million tonnes of thermal coal and 178 million tonnes of metallurgical coal, earning $32 billion and $37 billion in export revenue, respectively. This made Australia the leading producer and exporter of both types of coal. They’re used for steel production and electricity generation. Their thermal coal accounted for 29% of the global trade while their metallurgical accounts for 55%.
The demand for Australian coal is driven by several factors, such as:
- The quality and diversity of Australian coal: Australian coal is known for the quality and diversity of its properties. It has a high energy content, low ash, low sulfur content, and low impurities. All of these make it suitable for different applications and markets. Any needs a customer may have can be met by the wide range of coal grades in Australia. With types ranging from sub-bituminous to anthracite, and from thermal to metallurgical, they’re sure to have what you’re looking for.
- The proximity and reliability of Australian coal: Compared to other countries, Australia is located close to major regions in Asia that consume coal. Reducing time and transportation cost. Its supply chain also ensures there’s no delay in delivering their product with efficient asx mining companies operations, rail networks, ports, and shipping services.
- The competitiveness and flexibility of Australian coal: Australia faces stiff competition from other coal exporters like Indonesia, Russia, South Africa, Colombia and the United States who also have abundant resources at a low cost. However they maintain their edge by investing in innovation and quality improvements as well as diversifying their products and markets. They can also adjust production based on market conditions and customer demands.
Future scenarios and projections of coal stocks in Australia 2024
The future of Coal Stocks ASX in Australia depends on the future of the global coal market, which is influenced by various factors such as:
- The economic growth and energy demand in key markets: Demand for coal is closely linked to economic activity and energy consumption in major coal-importing countries, particularly in Asia. The IEA predicts that between 2022 and 2024 the global economy will grow by an average of 3.6% per year and the demand for energy will increase by 1.4% per year during the same time period. However, these projections are uncertain due to complications like the COVID-19 pandemic, trade disputes, political tensions, and changes in policy.
- The environmental policies and regulations in key markets: Demand for coal is also affected by policies and regulations created to decrease greenhouse gas emissions and air pollution from fossil fuels. In 2024 it’s estimated that over 40% of global demand for coal will follow some form of carbon pricing or emission trading scheme. Some countries have decided to phase out or limit their use of coal in the near future such as China (net-zero emissions by 2060), Japan (carbon-neutral by 2050), South Korea (net-zero emissions by 2050), India (450 GW of renewable energy by 2030).
- The technological innovations and cost reductions in key markets: Coal demand is also influenced by new technologies that make it easier to create cheaper alternatives that are cleaner than it too. The IEA expects renewable sources of energy to continue expanding their share in the mix for electricity generation globally from just 23% in 2022 to around 26% four years later. In addition to this, they predict technologies like carbon capture, storage, utilization (CCUS) and hydrogen will play a more important role in upcoming energy systems, especially ones that are harder on our environment like industry production and transport sectors.
Given these factors, the future of coal stocks in Australia 2024 can be explored under different scenarios, such as:
- A baseline scenario, which assumes that the IEA predicts that Australia’s coal production will increase by 1.8% per year between 2022 and 2024, hitting a maximum of 512 Mt in 2024. Exports will grow by 2.1% to hit around 398 Mt in the same year. And their revenues will slide up from $69 billion in 2021/22 to $75 billion in 2023/24. Australia’s coal stocks will benefit from plain growth.
- A high-demand scenario, which assumes that global economic growth, and energy demand is going to accelerate beyond what was expected, and environmental policies and regulations are going to be weaker or delayed. Under this unlikely scenario, the IEA predicts the Australian coal industry would increase its production by a whopping 2.8% per year between 2022 and 2024, reaching a max of about 533 Mt in that year. Exports would also go up at an increased rate of about 3.2%, potentially reaching about 422 Mt in that same year. The industry export revenue is projected to climb from $69 billion in ‘21/22 fiscal years to a staggering $82 billion in ‘23/24 fiscal years.
- A low-demand scenario, which assumes that the global economy and energy demand are lower than expected. Meanwhile, environmental policies and regulations are making themselves known faster than ever. It’s a low-demand scenario that the IEA is keeping their eye on. The agency predicts that Australia’s coal production will decrease by 0.7% each year between 2022 and 2024, with it falling to 485 Mt in 2024. Coal exports are also in decline as they’re projected to go down by 0.9% per year over the same time span, sinking to 365 Mt in 2024. As for revenues from coal exports, we’ll see a drop from $69 billion in 2021/22 to $61 billion just two years later. With everyone looking for alternative ways to power things up, Australia’s coal stocks will be affected heavily as we watch this play out.
Conclusion
The future of coal stocks in Australia is uncertain. It depends on many things, including the global market, technological innovation, and price movements. There are a bunch of factors that can influence the future of worldwide coal. Those include economic growth, energy Stocks demand, environmental policies, and price movements. So it’s really anyone’s guess at this point. However, while you’re throwing your guesses out there the IEA would like to add three more for 2024: a baseline scenario, a high-demand scenario, and a low-demand scenario. Monitoring these will help you make better predictions than us at least. With each one having different implications for Australia’s production, exports revenue and stocks in general. So if you’re planning on making an investment in Australian coal stocks just know it’s probably going to be a bumpy ride.
FAQs
What is the prediction for coal stocks?
The predictions for coal stocks are all over the place. An example of this is how Wall Street Zen highlights Alliance Resource Partners as a top coal stock to buy with a score of 59, which is 15 points higher than what the whole coal industry averages.
What is the future of coal in 2023?
Coal prices look like they’ll be a mixed bag. It’s expected that thermal coal prices will rise to US$360 a tonne for FY23, then drop back to US$239 for FY24. The price for metallurgical coal is predicted to decrease from US$404 per tonne in FY22 to just US$262 per tonne for FY23 and even further down to US$238 for FY24. This doesn’t mean that demand isn’t going up though. China and India should see an increase in production in 2023.
Does coal have a future in Australia?
Australia’s future with coal isn’t looking too bright. Exports are expected to drop to A$38 billion in the fiscal year of 2023-24 from A$64 billion in the previous year. Power stations that burn coal are slowly being phased out due to obstacles, which could lead them into retirement and signal an energy sector shift. Despite all this though, by the time we get to 2023 exports should start going up again and it’s projected that thermal coal alone will exceed $75 billion compared to the $46 billion it made in 2021-22.
What is the outlook for the coal industry in Australia?
The future of Australia’s use of coal appears torn apart throughout 2023. Weak export volumes would make it seem like earnings from both thermal and metallurgical sources won’t bring much at all, but analysts expect over $57 billion dollars from it. We can possibly thank Japan and India’s lack of interest in it anymore due to reduced demand. However, it’s not all bad news. They use to buy coking coal from Australia, but that time is gone since they now receive it from other countries. Nonetheless, it’s predicted to rise to $US350 per tonne for 2023.
