BAKU, Azerbaijan, May 3. Thermal coal prices will remain historically high this year as Western countries phase out imports from Russia, Trend reports with reference to the company.
“What’s more, non-Western countries are unlikely to aggressively ramp up imports from Russia for fear of secondary sanctions. That said, current high prices will incentivise supply elsewhere and we expect more subdued growth in demand this year as global economic activity, notably in top consumer China, slows. Although high prices and slowing global economic activity will hold back thermal coal demand this year, we still expect growth of about 3 percent versus 2021. For a start, even though prices are high, coal is still cost competitive with natural gas for use in power generation. That’s true in the EU, which has a carbon price, so it will be even more the case in economies with lower or no carbon prices,” the company said in its recent report.
A key reason why Capital Economics expects thermal coal prices to ease back this year is the company suspects that coal exporters elsewhere will maximise shipments in a bid to capitalize on high prices and strong demand.
“Admittedly, shipments have been quite steady recently, but we suspect they will pick up from here. Overall, we forecast that the global coal market deficit will widen slightly this year as demand growth should exceed supply growth, mostly because of lower Russian supply. That said, the outlook for the thermal coal market, like all energy markets, is especially uncertain this year because it depends on just how much of Russia’s exports are ‘shut in’, which itself depends on Western sanctions. It also rests on how quickly and by how much other countries can raise exports,” reads the report.
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