Coal finishers have responded to higher prices by increasing production, thereby oversaturated the market. While demand for electricity in countries like Indonesia may absorb some additional volume, producers need to be careful, analysts said at the Asia Coal Conference.
The global coal market is projected to surplus 16 million tonnes this year, said Rodrigo Esheverri, chief coal analyst at Noble Resources. “Those producers looking to increase output in the second half of this year may face price pressure,” he said at the conference. “Manufacturers are making money now, but investing in and expanding their own production is actually not a good idea for the market,” Esheverri said.
Indonesia's coal industry has benefited from rising prices this year after a downturn in 2015 and many small producers have gone out of business in 2016, although recent price declines could mean even more difficulties in the future.
Asia-focused Australian coal prices rose 130 percent to over $ 110 a tonne last year, but fell 20 percent from early April to just over $ 70 a tonne.
There is a risk of oversupply of coal in the global market
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