After falling in 2020, spot prices for thermal coal rebounded throughout 2021. They spiked in the second half of 2021, as supply was unable to ramp up quickly enough to meet the first-half’s big jump in demand, particularly in China. Higher natural gas prices drove coal prices up further. In October 2021, Newcastle free on board (FOB) thermal coal with a calorific value of 6 000 kcal/kg was trading at USD 253/t. The Argus/McCloskey’s Coal Price Index1 (API) 2, which tracks cost, insurance, and freight (CIF) prices, followed a similar trend and reached an unprecedented USD 260/t. In response to shortages, China boosted coal production in the second half of 2021, and by the end of the year, coal prices were easing.

In January 2022, in response to domestic shortfalls as producers focused on higher-priced exports, the Indonesian government immediately suspended exports, causing prices in the Asia-Pacific region to rise back to the levels of October 2021.

Russia’s invasion of Ukraine and the resulting sanctions against Russia drove coal prices to a new all-time peak in March 2022. European thermal coal prices caught up again with Australian prices, while Chinese import prices were less affected owing to lower demand and enhanced domestic production following the government’s guidance. With the end of the heating season in the Northern Hemisphere, global seaborne thermal coal prices eased slightly in April. Still, European efforts to reduce energy imports from Russia kept a floor under prices.

Flooding in Australia hindered coal production and transport, pushing Newcastle FOB prices to an all-time high of USD 425/t in May – a third record within eight months and nine times their level in September 2020.

Russia reduced gas flows to the EU during the second quarter of 2022, raising fears it could cut them off completely. This prompted European energy companies to buy more coal and push prices up further. Subsequently, API 2 coal prices hit a new all-time high of USD 425 /t in June. 

At the same time, Chinese import prices for thermal coal decreased slightly as higher production and moderate demand led to lower import volumes. In addition, Chinese companies, like those in various other importing countries, are buying Russian coal at discounted prices.

Coal traded in the Pacific Basin includes a wide range of calorific values (CV). Although different types of coal can substitute for each other to some degree, they each represent separate market segments.

In the second half of 2021, when supply was tight in China and India, prices in all market segments rose in parallel to record levels and then eased as Chinese imports fell by the end of the year. However, the current supply strains in Europe and Northeast Asia mainly affect high-grade coal prices, while Indonesian low-grade coal prices have remained almost unchanged since April 2022.

In June, the high-CV thermal coal market was so tight that it traded at a higher price than metallurgical coal, which has an even higher CV. This unprecedented phenomenon is a clear indication of the extraordinary situation in coal markets.