Coal prices will drop up to 81 per cent says authority

A national monetary, fiscal and market regulator predicts the value of Australian coal will sharply decline before the end of 2022.

The Department of Treasury expects metallurgical and thermal coal prices to respectively decrease nearly 75 per cent to US$130 (A$173) a tonne free on board (FOB), and 81 per cent to US$60 (A$79.90) a tonne FOB, sometime in the September quarter.

“Treasury is again sticking with its long-standing iron ore forecast of $US55 (A$73.20) per tonne by the end of September, despite recently hitting around $US134 (A$178.50) per tonne,” the latest federal budget strategy and outlook paper said.

The department claims coal prices temporarily almost reached “record high levels” due to Russian President Vladimir Putin’s proposed invasion of Ukraine. However, it believes prices will soon return to former levels.

“Commodity prices are near record high levels, in part due to the Russian invasion of Ukraine, [and] metallurgical and thermal coal spot prices have recently reached highs that are 62 per cent and 53 per cent above previous peaks,” the paper said.

“In line with past practice elevated coal, iron ore and metals prices are assumed to return to levels consistent with long-run market fundamentals by the end of the September quarter of 2022.”

There is still a chance Russian commodity exports might be further disrupted. If this occurs, coal prices could potentially stay high in 2023.

“This would see the prices of some of Australia’s key commodity exports remaining elevated for longer than under the 2022-23 budget assumptions. These disruptions could also support higher-than-expected energy commodity prices as well as other key commodities exported by Russia, such as metallurgical coal and wheat,” the paper said.

Federal Treasurer Josh Frydenberg hopes coal prices will stay high, because it brings extra revenue to government coffers.

“If these high prices stay here for the next six months that would be an additional $30 billion to the budget bottom line,” he said according to the Australian Associated Press.

Click here to read the full budget strategy and outlook paper.

Related articles

Contract awarded for new Bowen Basin coal project
Industry donates coal to relieve Russia-Ukraine resources shortfall
Coal spot price could hit $685 a tonne due to Russia-Ukraine tension says analyst
Mining giant forms new partnership at Central Qld mine.