World thermal coal prices will remain low until 2016

Global coal prices will remain low until 2016 due to surplus that continues to haunt the market as producers increase production. Coal prices in Europe and Asia have lost more than half of their value since spring 2011. A mild winter in Europe and weak demand for coal-fired power generation in Asia have kept inventories high.

European coal for September delivery is trading at $ 72.65 a tonne, a five-year low. Australian coal prices also fell below $ 70 /t as output growth in the first quarter of this year coincided with a slowdown in demand in China, the world's largest coal buyer.

Analysts believe the coal market should recover prices in 2016 and 2017. They believe the surplus could even turn into a deficit after 2017, because many mines have been closed indefinitely after three and a half years of market decline. However, low coal prices are forcing many producers to operate at a loss, and most mines will have to cut production before prices rebound significantly.

Until now, production cuts were carried out only by US producers, who have long held back their output, but in the near future it will affect others as well. However, when the global coal market starts to pick up after 2016, US exports will be needed to fill supply gaps, although a significant rebound in prices will only come when millet rises substantially.