Abstract
The international trade in thermal coal has undergone several paradigm shifts in the last 20 years. Coal-fired power generation had been the base load for the electricity grids of many countries worldwide. Due to the steady growth in demand and supply over time, the market was characterized by a small degree of price volatility. Many power generators were state-owned with fuel pass-through power prices. All of this changed when coal gradually lost its base load status which combined with the privatization of the power market and lower natural gas prices meant that participants in the international coal market had a need for financial tools to manage their respective risks which gave rise to the a more commoditized thermal coal market with free on board and cost, insurance, and freight pricing indices and various financial tools. In recent years the demand for imported coal has seen a marked reduction in the Americas, Europe, and Northern Asian countries with increases in demand for thermal coal imports in Southern Asian countries and a volatile Chinese demand. Public pressure upon governments and corporations to advance legislation and business practices that will reduce global greenhouse gas emissions has resulted in a steep downward trend in coal demand and production in key international markets.
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