The evolution of the international steam coal market

Purpose: The objective of this paper is to analyse the evolution of international steam coal trade, the nature of coal trade contracts and the pricing mechanism in the two main coal trading regions - the Atlantic and the Asia-Pacific, from the early 1980s to recent years. The historical developments and future directions of the market are discussed. Design/methodology/approach: The past developments of the international steam coal market is first reviewed and then compared to the four stages in the development of the international crude oil market in terms of trade and pricing, as identified in Roeber. Findings: The four stages in the development of a mature spot market are: appearance of the need for short-term physical balancing, availability of price reporting and transparency, price feedback from short-term prices to long-term prices and emergence of risk management instruments. It is found that the international steam coal market has already gone through the first three stages and is progressing in stage four. A mature spot market for steam coal is in prospect. Originality/value: This paper provides a structured review of the development of the international steam coal market. It provides industry information to policymakers, academics and modellers who need a comprehensive understanding of the international steam coal market.