Coal prices to be under pressure in 2016, bleak future ahead as it falls out of favour

Global coal prices, down 60 percent since the beginning of 2011 due to chronic oversupply and falling imports into China and India, are expected to decline further this year clean energy policies challenge its long supremacy in the energy sector, a World Bank report said.

“Coal prices are expected to decline 13 percent in 2016 to $50/ton, on continued weak demand and oversupply,” the Bank’s latest Commodity Markets Outlook report said, adding that the industry faced difficult market conditions, as cheap natural gas and policies that favor clean energy challenge coal’s position in the power sector.”

The report said Europe and United States continued to shun coal amidst a global drive towards cleaner energy collapsing gas prices and increasing power efficiency, but global coal supplies were rising aided by falling costs and depreciating producer currencies.

“China’s coal imports fell by one-third in 2015 due to slowing industrial activity, growing contributions from other sources to generate power, and government policies to limit coal use. China is suspending the approval of new mines for the next three years, and in an effort to reduce pollution coal’s share of energy consumption is to be reduced to 62.6 percent this year from 64.4 percent in 2015. In addition, rising capacity of China’s high-voltage long-distance power transmission network could suppress coastal import demand,” it said.

Import demand in China is expected to continue falling, and will only partly be offset by rising demand in India and other emerging markets. Coal also faces declining consumption in the OECD, particularly in the U.S. and Europe. Ample coal supplies are likely, in part because of the ramp-up in new capacity from earlier investment. There is also significant spare capacity in countries such as Indonesia and Australia that could be brought on-line, the report said.

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