LONDON May 9 The global thermal coal market will remain oversupplied this decade as dwindling demand for the fuel clashes with rising production, Deutsche Bank said on Thursday.
Thermal coal prices have already dropped around 30 percent since last peaking in 2011 after the nuclear reactor meltdown at Japan's Fukushima power station triggered a boom in coal and gas imports from the world's third biggest economy.
Since then, healthy production from coal exporters such as Australia, South Africa and Colombia have clashed with slowing demand from key users in North America, Europe and China, and Deutsche Bank said this trend was set to continue until 2020.
"Thermal seaborne coal markets face a combined threat of steadily growing supply in the largest producing regions and a levelling-off or decline in demand in consuming regions," the bank said in a research note.
"Three of the most important demand centres, China, Europe and the U.S., contain the seeds of a softening in demand growth, while U.S. export capability may grow," it added.
American coal exports have risen as a shale gas boom in the U.S. has led to an oversupplied market, making gas more attractive for power generation, and forcing coal miners to seek new buyers abroad.
In Europe, where coal consumption is high, demand is expected to fall in future as energy efficiency increases and renewable power generation rises.
China, the world's biggest coal importer, is grappling with rising pollution and seeking ways to reduce its reliance on coal, which is dirtier for power generation than natural gas.
Deutsche Bank said these market conditions meant it saw Australian coal prices of $95 per tonne in 2015 and $101 per tonne in 2020. Australian coal prices for delivery next month are currently trading around $88 a tonne.
"We believe that new demand preferences in the largest consuming nations will result in much lower demand growth going forward, pushing prices lower in real terms through 2020," the bank said.