Australia is the world’s fifth largest producer of black coal, producing over 430Mt in 2017, behind only China, India, the USA and Indonesia. Most of Australia’s production, around 370Mt, is exported on the seaborne market, of which 200Mt was thermal coal in 2017. Australian thermal coal exports have grown from 112Mt in 2007 to 200Mt, in response to strong demand growth in Asia and higher coal prices. Japan is by far the major destination for Australian thermal coal, but China is a rapidly growing market while Korea and Taiwan are also important destinations.

Australia’s major competitors in the Asian seaborne thermal coal market are Indonesia and South Africa. Indonesia is the world’s largest exporter of thermal coal and exported nearly 400Mt in 2017. Its unique river system enables Indonesia to bring supply to the seaborne market very quickly and relatively cheaply. However, Indonesian coal is of lower quality than Australian thermal coal and is also more susceptible to price fluctuations due to lower margins. South Africa has taken a strong market share in the western Asian markets of India and Pakistan but has struggled to gain a foothold in the north Asian and southeast Asian markets due to a freight differential and strong competition from Indonesia and Australia.

The seaborne thermal coal market is highly competitive, with exporters competing against each other as well as domestic production in many countries. Despite this, Australian thermal coal is still highly desired in the seaborne market. This is driven by many factors, including the generally higher quality of Australian thermal coal (higher energy and lower impurities), power plant design dependency on Australian thermal coal in north Asia, end-user mine and infrastructure equity agreements, take or pay contracts which provide supply stability and visibility, and strong stability in the historically important markets of Japan, Korea and Taiwan.

Commodity Insights has forecast thermal coal import demand from 2018-30. The short-term forecast was based on known additions of coal-fired power capacity across the region, less any growth in domestic coal production where applicable. Longer-term, population growth forecasts and electricity consumption patterns were used to forecast overall power demand, against which coal’s share was estimated using official government policy documents for each country.