Global trade in metallurgical coal fell to 349 million tonnes in 2023 and is now modelled to shrink to 333 million tonnes by 2029, according to the Australian government and an industry analyst. The Resources and Energy Quarterly from the Department of Industry, Science and Resources and Wood Mackenzie’s Australia coal supply briefing both show that the recent bounce in steelmaking coal is losing momentum, with export growth forecast to peak and then weaken through the rest of the decade. The government’s bulletin and independent commentary diverge on timing and magnitude, with the REQ projecting a peak in FY2027-28 while some analysts see earlier or deeper downside. This scheduled wave of mine closures from 2027 to 2029 will be the concrete test of whether the recovery can be sustained.

Wood Mackenzie and the Australian government’s Resources and Energy Quarterly have together changed the tone of the outlook for metallurgical coal, the coking coal used in steelmaking. Both reports show that the recent rebound is losing steam, and that global trade and Australian export growth will reach a peak before weakening. The government’s REQ and Wood Mackenzie are cautious about the medium-term trajectory, and they have published updated modelling to reflect a faster shift in steelmaking technologies and shifting import patterns.

Why demand is cooling

The REQ reported that global trade in metallurgical coal fell to 349 million tonnes in 2023 and is projected to decline to 333 million tonnes by 2029. That trajectory is driven in part by wider adoption of electric arc furnace technology and direct reduced iron processes, both of which reduce the need for blast-furnace coal.

The government bulletin explicitly flagged uncertainty over the pace of technology change in steelmaking, but modelled a scenario where higher electric arc furnace and green-steel production reduces demand from traditional blast-furnace mills. The REQ also singled out major importer shifts. It projects China’s metallurgical coal imports will drop by 27% by 2029, while India remains the primary growth market for met coal over the decade, albeit at lower growth rates than earlier forecasts had suggested.

Independent voices have been quicker to emphasise risk. The Institute for Energy Economics and Financial Analysis, IEEFA, and other commentators noted that India’s possible move toward domestic green-hydrogen steelmaking, greater scrap use in Japan, and potential supply substitution from Mongolia and Russia could further weaken demand for Australian exports. IEEFA and similar analysts argue these factors create significant downside risk to volumes that earlier outlooks didn't fully price in.

Australia’s supply picture: a mixed signal

On the supply side, the picture is also mixed. The REQ continues to project a net rise in Australian metallurgical coal exports against FY2024-25 levels by FY2029-30, and it places a peak in exports at FY2027-28 in its five-year outlook.

That's a more bullish outcome than some critics expect, and it contrasts with reporting by other strands of the REQ and private analysis that suggested an earlier peak.

Mastheads

Wood Mackenzie’s Australia coal supply briefing noted similar supply-side dynamics in its summary and provided a base-case dataset and modelling assumptions undergirding its assessment. Wood Mackenzie pointed to the same interplay between changing demand and mine-level capacity that shapes the medium-term outlook, though its public summary doesn't publish every line-by-line export forecast found elsewhere. That leaves some gaps when trying to align the detail of private modelling with published government numbers.

Domestically, total Australian coal production will probably rise by 2.8% to about 550 million tonnes in 2024, according to industry modelling and reporting. That rise is driven mainly by thermal coal and by a run of new or restarted operations. Named projects include Bengalla, Callide, Ironbark No 1, Maules Creek, Moolarben, Olive Downs Complex and Wilkie Creek, which were projected to lift combined output from roughly 41.1 million tonnes in 2023 to about 54.7 million tonnes in 2024.

At the same time, the industry and government datasets highlight a planned wave of mine and plant closures from 2027 that would remove the equivalent of 53.8 million tonnes of production capacity from the market. The REQ and industry reporting name closures including Clermont in 2027, Yallourn and Springvale in 2028, and Oaky Creek in 2029.

Those scheduled exits form an important part of the supply narrative. They could tighten markets, or they could simply mark the end of higher-cost or ageing operations as demand shifts.

The REQ also broke new ground by, for the first time, forecasting that Australian thermal coal exports would fall in the five-year outlook period. The bulletin projects thermal coal exports will decline by about 14 million tonnes in FY2029-30 relative to FY2024-25 levels. That's a notable revision for a commodity where Australia has been a long-term seller to Asian power markets.

Tension between forecasts is most apparent on timing. A March 2024 REQ bulletin was read as forecasting a peak in around two years’ time, which aligns roughly with 2026 in that bulletin’s frame.

By contrast, the Department of Industry, Science and Resources’ published five-year outlook in the REQ places the met coal peak in FY2027-28 and still projects modest net export growth to FY2029-30. IEEFA and other critics say DISR has a history of overestimating export volumes in past outlooks and that the department’s figures may be too sanguine given the technological and market risks.

Wood Mackenzie’s public materials provide a high-level check on these dynamics, but the summary notes don't publish all granular export forecasts that would allow a line-by-line reconciliation with government data. That lack of identical disclosure makes it harder to pin down exactly when and by how much Australian met coal exports will roll over.

Policy and market watchers will be watching two concrete milestones. The REQ frames the fiscal-year peak in exports at FY2027-28, and the string of scheduled closures from 2027 to 2029 will remove tens of millions of tonnes of capacity. Those points will test whether the modest recovery that has lifted some mines can be sustained against changing steelmaking technology and shifting demand in major importer markets.

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The Resources and Energy Quarterly’s fiscal-year framing places an Australian metallurgical coal export peak in FY2027-28, and a cluster of mine and plant closures from 2027 to 2029 will be the immediate test of whether export volumes can hold up.

This article was created with AI assistance.