In the initial month of the fourth quarter, the Australian coal market grappled with a significant downturn, witnessing a sharp drop of approximately 10% in prices. The primary culprit behind this decline was the substantial domestic inventory of coal in Australia. Despite a growing demand for seaborne coal in Asia, especially in anticipation of peak winter consumption, prevailing market conditions are indicating a continued weakening of prices.

Soft European imports have further compounded the challenges for Australian suppliers, leading them to redirect exports to different destinations. Despite a surge in demand from Asia, particularly China, the lower domestic coal prices in the world's largest producer and consumer of this crucial fuel have contributed to the subdued seaborne coal prices. Suppliers are strategically adjusting to maintain competitiveness in the Chinese market.

However, amidst these market dynamics, coal miners are grappling with the escalating costs of terminal charges, adding to their concerns about cost inflation. The industry is also contending with challenges such as mining labour shortages, which not only curtail expansion plans but also elevate unit production costs. As the Australian coal sector navigates through these multifaceted challenges, industry stakeholders are closely monitoring global market trends and weighing strategies to adapt to the evolving landscape.

Contrastingly, the US coal market experienced a surge in prices by around 9% during the same month. This increase was fuelled by growing demand for coal from overseas, particularly Europe. The spike in demand can be attributed to the increasing need for coal from downstream power generation plants as winter approaches, leading to a rapid rise in heat demand. Power plants are proactively increasing their capacity to prevent or decrease the threat of an energy crisis during the peak demand season.

According to the Energy Information Administration, US coal exports witnessed a notable increase of 5.7 million short tons in the 12 months following the EU sanctions on Russian coal that went into full effect in August 2022. The surge in exports was primarily driven by a 22% jump in US coal exports to Europe, totalling 33.1 million short tons between August 2022 and July 2023.

In 2021, Europe received 84.6 million short tons of coal from Russia, constituting about one-third of Russia’s total exports. After the imposition of EU sanctions on Russian coal in April 2022, with full implementation in August 2022, the ban led to a near cessation of coal imports from Russia into Europe. The US, along with other coal-supplying countries, including South Africa and Colombia, stepped in to fill the gap. U.S. coal exports also saw an increase to Asia and South America during this period, although they declined in Africa, Australia and Oceania, and North America.

As a swing, or higher-cost, supplier in global steam coal markets, the United States capitalized on its position to shift steam coal exports to Europe. Over the 12 months after the full implementation of EU sanctions, from August 2022 to July 2023, U.S. steam coal exports to Europe totalled 14.4 million short tons, marking a 51% increase compared to the previous 12-month period. This increase, along with a 6% rise in exports to Asia, contrasted with declines in U.S. steam coal exports to the other continents. U.S. steam coal, with its comparable quality to that produced by Russia, emerged as a natural substitute due to its premium-quality coal with a high heating value.