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Thermal coal prices steady at US$50 – US$60/t

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World Coal,

Cuts to thermal coal production around the world have helped to stabilise spot prices between US$50 and US$60 per tonne since April but weak demand will limit the chances of a price recovery in the short term, according to National Australia Bank (NAB).

Indonesian coal production has fallen by 19% in the first five months of 2015, while export growth from Australia has slowed to 3.8% y/y compared to 6.7% in 2014. Meanwhile, Chinese production is expected to fall 5% this year as domestic producers struggle for profitability.

On the demand side, Chinese coal imports are down significantly this year – falling 37% y/y to 93 million t over the first seven months, while demand from key importer Japan are expected to fall in the short term as the restart of the country’s nuclear capacity continues.

Import demand from India remains uncertain as the government’s stated aim to end coal imports within the next three years may prove unobtainable.

These trends will limit upside potential in the short term, said NAB, while cost pressures will limit the downside risk. The bank expects the 2016 Japanese financial year contract price to be US$62 per tonne (down from US$67.8 per tonne this year).

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