Global coal supply summary: average export costs on the rise

Our analysis of global coal supply indicates a decline in average cost reductions in 2016 and a rise in costs from 2017 onwards. In 2016 we estimate that average cash costs for seaborne export thermal coal decreased year-on-year by 5% to US$42/tonne and 7% to US$69/tonne for metallurgical coal as the decline in diesel prices and producer currency devaluation slowed. We expect this declining trend in costs to end in 2017, as productivity levels moderate, strip ratios rise and royalties increase in line with higher prices. Margins also improved due to the lower costs and the significant increase in export prices in the second half of 2016. We expect average thermal coal margins to rise from US$14/tonne in 2016 to US$24/tonne in 2017, and metallurgical margins from US$32/tonne to US$79/tonne based on an average Newcastle thermal price of US$81/tonne and an Australian HCC benchmark price of US$179/tonne.