2024F pricing environment could be more accommodative
Looking ahead to 2024F, with a sharply-colder European winter gathering force, we conclude that the recent correction has already passed. Indeed, 3Q23 probably marked the bottoming out of coal prices, as signs in 4Q23 revealed how the coal market has in fact stabilized. At this juncture, we are anticipating a 2024F Newcastle coal price to average USD140/t, given that the year is still young. Moreover, we refer to key signals to be alert for this year, to determine whether market trends will be appealing: 1) state of coal market balance will be strongly influenced by India and China. More important is to ascertain whether Chinese coal imports really peaked in 2023F, and if so, whether 2024F imports will be more flattish or subject to a sharp decline 2) How severe will the 2023-2024F winter be, and how much gas remains in European storage -> how easy will it be for Europe to replenish their storage this summer? We foresee these as most probable scenarios for the 2024F coal market:

 Base Case: Newcastle Coal price will drift sideways, between USD125-160 per ton, and end up averaging at USD140/t. under conditions of: minor decline in China coal imports, and moderately decent coal import demand from India, coal supply growth remains limited. and Europe LNG storage sits at 35-40%, post-2023-2024F winter; and with no supply disruption in LNG market.
 Blue Sky: Newcastle Coal price will continue rallying, surpassing USD160-190/t, and end up averaging USD174/t. under these conditions: freezing European climate leaves the region with <30% gas storage by end of 2023-2024F winter, which would probably ignite another rally in energy price, forcing the Europeans to pay a considerable premium over Asia for LNG supply to replenish their dangerously low gas storage level, while simultaneously pushing coal burn higher to conserve gas. China, India, Europe will import more coal. Supply growth remains constricted.
 Worst Case: Newcastle coal price only manages to trade between USD100-140, and ends up averaging USD120/t. In an environment of: major decline in Chinese and Indian coal imports, strong supply from Indonesia and Australia, Russia, Colombia and South Africa. Europe LNG storage sits comfortably at 50% or above by end of 2023-2024F winter.

Coal - Coal at a Crossroads

Coal - Coal at a Crossroads

09 January 2024 - 09.46am

Coal - Coal at a Crossroads

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