Asia and Europe were the primary destinations for U.S. coal exports.
Fitch Solutions recently raised its thermal coal price forecasts for the remainder of 2022, saying it now expects Newcastle thermal coal to average around $320 per metric ton (mt) in 2022, compared to its previous forecast of $230/mt. Thermal coal prices averaged $326/mt over January to July and this new forecast implies an average of around $310/mt over the remainder of the year.
In an August market study, Thermal Coal Prices: An Uncertain Winter Will Keep Prices High, Fitch Solutions said it expected coal demand to be stronger than it had previously anticipated and this is the reason for the higher price forecast. The main driver of high thermal coal prices since Russia’s invasion of Ukraine in February 2022 has been a rapid diversification of European energy demand away from Russian gas and coal, with a resulting increase in demand for gas and coal from other suppliers. As infrastructure bottlenecks have prevented Russia from fully diverting coal and gas exports to markets outside of Europe, the effect has been to reduce the amount of gas and coal available on the global market.
Russia’s willingness to restrict pipeline gas deliveries to Europe during July has accelerated European demand for gas and coal from other suppliers and this trend will remain in place over the coming months, even if Russia’s gas deliveries rebound. Fitch Solutions said it’s unlikely that Russia will fully cut gas supplies to Europe in Winter 2022/2023. Nonetheless, reduced deliveries of gas from Russia to Germany via the Nord Stream I pipeline over July has shown that Russia is more willing to use gas exports as a political weapon. Russia provided 40% of the bloc’s natural gas supply over 2021 and soaring regional energy prices will continue to drive policy revision across much of the EU with the aim of aggressively diversifying away from Russian energy supply.
The EU Commission will continue to enable increased power generation from coal in the bloc over 2022 and 2023, which will temporarily reverse the long-term decline in coal consumption in Europe. As coal production in the EU has declined dramatically over recent years, increased demand for coal from European utilities will require increased imports. For instance, the German government has requested that hard coal-fired power plants in the country that were scheduled to be shut down by the end of 2023 to either ramp up electricity output, or stand ready to do so in the event of a gas supply crunch. The German government also looks likely to pass legislation in October that will restart lignite-fired power plants in the country.
Not only will increased European demand for non-Russian coal boost seaborne coal prices, but increased European demand for seaborne liquefied natural gas (LNG) cargoes will indirectly boost coal prices. Greater demand will keep global LNG prices at near record levels and this will encourage electricity generators to switch from gas to coal feedstock where possible.
US Coal Exports Rise in Q2
According to the latest data analysis from S&P Global Market Intelligence, U.S. coal exports rose in the second quarter as demand and prices remained elevated amid a global energy crisis. Shipment volumes increased 14.8% quarter over quarter to 21.6 million mt and climbed 4.6% year over year.
Asia and Europe received the most coal shipments from the five largest ports in the U.S. Other destinations for U.S. coal exports included South America and Africa. All coal shipped through Seattle during the second quarter went to Asia.
Seven of the top 10 U.S. ports for coal exports recorded higher shipments year over year, while coal exports from eight ports grew from the previous quarter. Exports from Norfolk, which ships more coal abroad than any other U.S. port, increased 5.8% year over year and jumped 6.4% compared to the first quarter. The ports in Buffalo, N.Y., and Cleveland booked significant increases quarter over quarter, soaring 254.6% and 419.3%, respectively.
Metallurgical coal accounted for most of the shipments from Norfolk and Mobile, while coal exports from Baltimore, New Orleans and Seattle largely consisted of other coal products.
