* Mining output to rise in Australia, Colombia, South Africa
* Demand in emerging markets weakens
LONDON, March 20 Thermal coal prices are likely
to fall in 2014 as mining output increases in an already
oversupplied market while demand in emerging markets drops,
analysts said on Thursday, amounting to a third straight year of
Prices of coal, the top fuel used to generate electricity in
the world, have halved from a peak in 2011 and are down almost
70 percent from their all-time highs in 2008. Analysts say they
are likely to weaken further.
"As global output is now set to expand, we believe the
supply overhang will persist and revise our forecast for
(Australia's) Newcastle coal lower to $74 per tonne as an
average for 2014, down from $82 per tonne previously," Bank of
America Merrill Lynch said in a research note on Thursday.
"We also expect front prices in Europe to hit $70 per tonne
at some point during 2Q (the second quarter of 2014)," it added.
Analysts said the low prices were a result of healthy mining
output in export countries such as Australia, Colombia and South
Africa combining with weakening demand, especially in China and
"Excess supply from producing countries exacerbated by
weakened Asian demand growth have continued to affect current
international coal trade price behaviour significantly," French
bank Societe Generale said in a research note, also on Thursday.
Analysts said that Chinese efforts to begin using more
natural gas for power generation rather than coal, which is
dirtier, could further erode thermal coal markets.
"A combination of widespread loan defaults ... and clean air
initiatives in China could spell even more trouble for sea-borne
coal in the months ahead," Bank of America Merrill Lynch said.
China's Premier Li Keqiang this month said the country would
"declare war" on pollution and that the government would unveil
detailed measures to tackle what has become a hot-button social
Despite the current oversupply and weakening demand,
analysts said prices could begin picking up towards next year.
"The situation should improve in 2015, when demand from Asia
(primarily India and China) has the potential to act as a
primary catalyst in hastening the reduction of the current
oversupply in the market," Societe Generale said.
Bank of America Merrill Lynch said that "the sea-borne
market looks a bit more balanced in 2015 as exports slow due to
mine ramp-ups tailing off, and imports improve with global
(Reporting by Henning Gloystein; editing by Jane Baird)