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Wednesday, 26 August 20
Indonesia’s exports to decline sharply from record highs  
Indonesia is the world’s largest thermal coal exporter, selling an estimated 466 million tonnes in 2019 a record high from production of 610 million tonnes. Indonesian thermal coal exports have come under pressure as thermal coal prices weaken, with prices below the cost of production for some miners. The COVID-related lockdown in India the main destination for Indonesia’s exports has reduced demand for Indonesia’s lower calorific coals. Indonesia’s exports are expected to fall sharply from record highs, declining to 420 million tonnes in 2020, said Office of the Chief Economist’ of Australia in its Resources and Energy Quarterly June 2020 report in early July 2020.
The report further noted that, Indonesia’s exports are expected to increase slightly in 2021 and 2022 as prices recover, however, the extent of the rebound will be limited by a more general downward trend in Indonesia’s exports. The Indonesian government has previously flagged plans to limit annual production in order to safeguard coal reserves for future domestic use. The Indonesian government is targeting an output cap of 550 million tonnes for 2020. Whether this target can be achieved remains to be seen, with output having exceeded the target for the past few years.  
South Africa’s exports fall due to a COVID-related lockdown 
South Africa exported an estimated 77 million tonnes of thermal coal in 2019, making it the world’s fourth largest exporter. South Africa began a lockdown in late March, which was subsequently extended until the end of April. The lockdown reduced exports from the country’s largest port Richard’s Bay  although a number of major exporters received exemptions which allowed them to continue operations. The lockdown also affected production for domestic use, with mines which were not supplying South Africa’s power utility Eskom only allowed to operate at 50 per cent of capacity during the second half of April. South Africa’s coal mines were all allowed to restart operations from 1 May. South Africa’s exports are forecast to fall to 65 million tonnes in 2020.  By 2022, South Africa’s exports are expected to recover to 77 million tonnes, said the report.
Developments in India  a major destination for South African exports will be key to the recovery of the nation’s coal sector. South African exports to India are expected to rise, and miners will increasingly target other Asian markets such as Pakistan as European coal consumption declines. A modest decline in domestic consumption should also help free up thermal coal for export. In October 2019, the South African government approved the National Development Plan, which foresees coal-fired power generation capacity falling from 37 GW at present to 33 GW by 2030.
Russia’s exports have been affected by COVID-19 
Resources and Energy Quarterly June 2020 report further said, Russia was the world’s third largest thermal coal exporter in 2019, shipping an estimated 181 million tonnes. Russia’s exports fell sharply year-on-year in the March quarter 2020. SUEK, Russia’s largest coal exporter, reported lower exports due to depressed seaborne prices and logistics issues on the eastern rail network. Russia’s exports are forecast to fall to 173 million tonnes in 2020, before rebounding to 184 million tonnes in 2022 as seaborne thermal coal demand recovers.
Export growth will be supported by ongoing government plans to invest in the coal industry and in associated rail and port infrastructure. Russia has been investing heavily in transportation infrastructure to the country’s eastern ports targeting the Asian premium market, where Japan’s utilities are diversifying their supply sources, and South Korea’s new regulations are lifting demand for Russia’s low sulphur coal. The low Russian ruble has also helped Russian coal miners. 
US exports to decline due to cost and infrastructure challenges 
According to the report, the US exported an estimated 34 million tonnes of thermal coal in 2019. The US is considered a price-sensitive swing supplier in the seaborne thermal coal market, with most US producers considered high cost.  US exports fell by around 30 per cent year-on-year in the four months to April 2020, and a number of producers have idled mines which will affect exports later in 2020.  Lower exports are partly related to the impacts of COVID-19 on the seaborne thermal coal market, but the US coal sector was already under pressure due to low natural gas prices, a strong US dollar, falling demand in Europe (the typical  destination for US coal), and a lack of infrastructure on the US west coast (near Asian markets). These challenges are expected to result in US thermal coal exports falling to 20 million tonnes in 2020, before rebounding to 24 million tonnes in 2022.   
Colombia’s thermal coal exports impacted by COVID-19  
Colombia exported an estimated 75 million tonnes in 2019. Exports increased solidly year-on-year in January and February, but declined in March and April as COVID-19 disrupted output. With Glencore’s Prodeco mine still offline at the time of writing, Colombia’s exports are forecast to fall to 65 million tonnes in 2020, before recovering over the next two years.  The low level of investment in Colombia’s coal sector in recent years,  and falling coal consumption in Europe where Colombian miners have historically sold their coal are expected to limit the prospects for growth in Colombia’s exports. Most of Colombia’s coal mines are on the Caribbean coast, and its miners face high shipping costs to growing demand centres in Asia said Resources and Energy Quarterly June 2020 report.
Australia’s Export earnings impacted by bushfires, rainfall and COVID-19 in 2019-20 
Office of the Chief Economist’ of Australia in its Resources and Energy Quarterly June 2020 report in early July 2020 said that, the value of Australia’s thermal coal exports declined from $26 billion in 2018-19 to an estimated $20 billion in 2019-20: the impact of price falls were only partly offset by an estimated 3 million tonne increase in export volumes.  A number of miners reported lower output as a result of bad weather and/or bushfires in the March quarter 2020, including BHP, Yancoal and Whitehaven.  Australia’s thermal coal exports have been relatively resilient to the impacts of COVID-19 to date. Exports increased year-on-year in February and March and, while falling back in April by around 7 per cent,  look to have only weakened slightly in May based on New South Wales ports data.
Thermal coal export earnings to decline driven by lower prices 
Acording to the report, Thermal coal export earnings are forecast to decline by around $4 billion to $16 billion in 2020-21, due to lower prices and slightly lower export volumes.
The benchmark Newcastle 6,000 kcal spot price has fallen to around US$50 a tonne, down from the US$60-70 a tonne range, and is expected to take some time to recover.  Australia’s thermal coal export volumes are forecast to edge down from an estimated 213 million tonnes in 2019-20 to 210 million tonnes in 2020-21. Forecast low prices over the next 12 months are expected to result in lower production at higher cost mines. However, the low Australian dollar and recent falls in oil prices (and resultant low diesel prices) should partly offset pressures from low seaborne prices.
In late May, Peabody announced the temporary closure of its 2.5 million tonne per annum Wambo underground thermal and semi-soft coking coal mine in New South Wales. Production will be halted at the mine for around 2 months from 19 June. Earlier in the month, Terracom Resources announced that it would target coal sales of 2 million tonnes in 2020-21 from its Blair Athol mine in Queensland (down from an expected 2.5-2.6 million tonnes in 2019–20), due to the impacts of COVID-19. Glencore’s Rolleston mine in Queensland, which produces around 16 million tonnes per annum, was reported to have stopped production for two weeks in early June, due to low prices. A number of mines which predominantly produce metallurgical coal have also announced cutbacks to output. Further such announcements are expected. A significant proportion of Australian thermal coal production is loss-making at current spot prices. On a calorific-value-adjusted basis, an estimated one third of Australian thermal coal exports are cash negative at prices of US$50 a tonne for Newcastle 6,000 kcal coal. However, a number of factors should see Australian supply remain relatively resilient and minimise the risk of widespread mine closures: 
Some Australian thermal coal is exported on contracts which provide Australian miners with some protection from lower spot prices, at least until these contracts expire. The 2020-21 Japanese fiscal year (April to March) contract price settled at US$68.75 a tonne, well above the forecast for average spot prices of US$54 a tonne for the same period.  
Mines may run at loss for a time given the costs associated with shutting down production until prices recover. The costs associated with placing a mine on care and maintenance are relatively high in Australia, compared with nations like Indonesia.
Mines may have ‘take-or-pay’ clauses in contracts with rail and port facilities, under which they incur costs whether or not they produce. Mines may continue to produce even if their costs are above prices, because take-or-pay costs are greater than losses from producing. 
Some of the mines that are uneconomic at current thermal coal prices do not rely on their thermal coal sales for the bulk of their revenue, because they mainly produce metallurgical coal. However, low metallurgical coal prices could threaten the viability of some of these mines.
Australian thermal coal export earnings are forecast to edge up by around $1 billion to $17 billion in 2021–22, driven by higher prices and a partial recovery in export volumes.
Revisions to the outlook for Australian thermal coal exports
Australia’s forecast thermal coal export earnings have been revised down by about $2 billion in both 2020-21 and 2021-22, due to both forecast low prices and lower export volumes.  
Forecast export volumes have been revised down by 9-11 million tonnes in 2020-21 and 2021-22. With global thermal coal demand expected to contract sharply in 2020 and to take some time to recover the ramp up in Australian thermal coal export volumes projected in the March 2020 Resources and Energy Quarterly is no longer expected during the outlook period. Higher-cost operations are under pressure, and other miners may defer both capital investment and the ramp up of production until market conditions become more favourable.

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