Coal – Regional Markets and Trade Patterns

Transportation costs account for a large share of the total delivered price of coal, therefore international trade in steam coal is effectively divided into two regional markets, the Atlantic and the Pacific. The Atlantic market is made up of importing countries in Western Europe, notably the UK, Germany and Spain. The Pacific market consists of developing and OECD Asian importers, notably Japan, Korea and Taiwan. The Pacific market currently accounts for about 71% of world steam coal trade. Markets tend to overlap when coal prices are high and supplies plentiful. South Africa is a natural point of convergence between the two markets.

The trade in steam coal has increased steadily both on the Atlantic and Pacific routes, but after growth in the1980s, trade in coking coal has stagnated in both regions.

Coal from any of the major exporters will find markets in either Europe or Asia, depending principally on freight costs. Transport costs tend to contribute to the operation of two regional markets in the Pacific (Asia) and the Atlantic (Europe). The Pacific market: Japan, North and South Asia; is supplied preferentially by Australia, Indonesia, and China because of geographic proximity. The Atlantic market is principally supplied preferentially by South Africa, Poland, US, Colombia and Venezuela.

The link between the two markets is made by the capacity of US exports to make available surpluses for export to Europe when prices are sufficiently high, and South Africa whose geographic position makes exports to Asia attractive after Europe. It should also be noted that Australia exports to Europe when transport costs and coal availability are favourable, giving it some of the characteristics of a marginal supplier. Prices in both regions tend to move in a close relationship, suggesting that a single world market does operate.