Have we reached the point of no return? This is the question increasingly being posed in boardrooms across the Australian coal sector. It is a sentiment that ZKR has encountered time and again in engagements with clients and stakeholders – a reflection of the acute challenges currently facing one of Australia’s most significant export industries.
In 2023 – 2024, Australian coal exports generated a staggering AUS$91.4 billion in revenue.1 This is not a sector on the economic fringes; it is foundational to Australia’s trade profile, regional employment, and industrial capability. Yet today, the industry faces what can only be described as an existential crisis, one with far-reaching implications not only for those who work in the sector, but for Australia’s broader economic resilience.
Over the past 12 months, both thermal and metallurgical coal prices have come under significant and sustained pressure, severely crippling Australian coal producer margins. The SGX December 2025 Australian Coking Coal contract, for example, has seen prices range from US$177 – US$277, and is currently trading at US$187.2 A price drop of more than 32% from its peak. These are not fluctuations; they are market convulsions.
Since July 2022, coal producers operating in Queensland have been subject to the most aggressive royalty framework in the global coal sector. The royalty regime is such an international outlier, that even BHP, ‘The Big Australian’, has announced it will no longer invest in Queensland coal assets.3 For a company of BHP’s stature to make this decision speaks volumes about the policy environment’s impact on investment confidence.
Operational cost pressure remains relentless. Despite a modest 3.0% CPI for March 2025, coal operators are facing inflationary headwinds across labour, logistics, and energy inputs.4 Margins, already under strain from weak pricing, are now being further eroded by rising costs.
However, the global commodities market is ultimately an exercise in the economic laws of supply and demand – coal is no exception. While the market is cyclical, it is also highly reactive to shifts in geopolitics, energy policy, and industrial growth. Three macro trends, in particular, point to a potential price rebound in the near term.
Additionally, the rise of artificial intelligence (AI) is fuelling unprecedented growth in electricity consumption, particularly from energy-hungry data centres. This surge in demand, which shows no sign of abating, will require expanded power generation capacity. For many developing and industrialising economies, this includes continued or increased reliance on thermal coal.
India is targeting annual steel production of 300 million t by 2030, more than doubling its 2024 output of 144 million t.5 Australian metallurgical coal, with its high quality and established presence in the Indian market, is well-positioned to supply this growth. As India builds out its steelmaking infrastructure, demand for Australian coal will only intensify.
Perhaps the most under-appreciated market factor is the near-complete absence of new Australian coal supply. With permitting, policy, and community opposition making new projects exceptionally difficult to bring online, supply will remain tight, even as demand rises.
The Australian coal industry has a long history of withstanding cyclical downturns. Today is no different. What is being seen is a sector actively recalibrating: optimising costs, innovating in production, and strategically positioning for recovery. This is not passive endurance, it is proactive adaptation.
If global demand rebounds as forecasted, driven by AI-driven energy growth, Indian steel expansion, and chronic supply shortages, the recovery could be swift and its economic impact seismic. The Australian coal industry is preparing for that moment. If history is any guide, it will emerge not diminished, but redefined, leaner, smarter, and just as vital to Australia’s economic future.
