The US export and domestic thermal coal markets face headwinds in 2024 due to mild global demand, according to industry sources.According to S&P Global, while natural gas prices could potentially boost coal consumption domestically, challenges such as warmer weather forecasts, oversupply, and competitive pricing from other coal-exporting countries pose significant obstacles.Export thermal coal prices from the US are expected to be backwardated in 2024 amid subdued global demand.The mild winter, oversupply issues, and insufficient demand are contributing factors to weakening prices, as observed by a US coal source.
Unless production aligns with demand, prices are likely to continue to soften, and a significant adjustment may not occur until the second quarter of the year.A coal buyer based in India highlighted the lacklustre pricing outlook for US spot coal in 2024. South African coal, offered at a discounted and competitive price, has increased competition, leading to a drop in prices in the Indian market.Additionally, petcoke prices are declining, adding to the competitive challenges faced by Northern Appalachian coal prices.Broker indications show a downward trend in FOB Baltimore 6,900 kcal/kg NAR coal pricing, with indications sliding from USD 87/mt to USD 86.25/mt for Cal 2024.Backwardation is also observed for US Gulf Coast coal prices, with indications showing FOB New Orleans 6,000 kcal/kg coal at USD 85/mt for January loading and USD 84.25/mt for Cal 2024.In its December US Coal Market Forecast, S&P Global Commodity Insights expects US thermal coal exports to decline from a forecast of 43.6 million mt in 2023 to 35 million mt in 2024.
The decline is attributed to Pacific Basin supplies dominating demand from China and decreasing demand from the Atlantic Basin.
The sentiment for the domestic thermal coal market is mixed. High electric power sector coal stockpiles exerted downward pressure on over-the-counter (OTC) coal prices throughout 2023.However, if natural gas prices increase in 2024, coal generation could become more competitive.S&P Global anticipates a potential plateauing of US thermal coal demand as declines in spot and contract coal prices spill into 2025.The competition between coal and natural gas will depend on how gas prices evolve.For Central Appalachia 12,500 Btu/lb CSX rail coal, broker indications reflect mixed sentiment for 2024. One broker sees a slightly backwardated market, while another envisions a slight contango.
In the Illinois Basin, both domestic and export demand have moderated, leading to a decline in spot physical coal prices. Brokers have mixed outlooks for Illinois Basin coal in 2024, with limited price movement.For sub-bituminous coal, specifically Powder River Basin (PRB) coal, prices are expected to increase in 2024. PRB coal supplies the MISO region, where coal consumption is projected to rise nearly 6 million st in 2024. Broker indications show an average forecast of USD 14.25/st for Q1 2024 to lock in solid margins.
S&P Global forecasts a dip in US coal production from 580 million st in 2023 to 540 million-545 million st in 2024 as a stockpile drawdown begins.Despite these challenges, uncertainties remain regarding the impact of evolving gas prices on the OTC market and the competitiveness of US coal in the changing energy landscape.The industry will closely watch market dynamics, trade flows, and government policies influencing coal markets throughout the year.
