World has 118m metric tons of coal it doesn’t need

The seaborne coal market is heading into 2016 with the biggest glut in at least four years.

An oversupply of thermal coal, used for power, will total 118 million metric tons, almost triple what it was in 2013, as the appetite for the carbon-intensive fuel wanes in parts of Asia and Europe, a Bloomberg Intelligence report published yesterday showed.

Countries including China and India may also import less as they rely increasingly on their own domestic supplies, it said.

Producers from the US to Australia rushed to expand coal production and add export capacity at the turn of the decade, only to have Asia’s demand fall below forecasts.

Western countries are also cutting consumption in an effort to curb global warming. The ensuing oversupply and price rout have led to hundreds of mine closures in the US alone.

“A lot of coal has to come out of the market,” said Hans Daniels, executive vice president for Doyle Trading Consultants, a coal analytics company.

“Suffice it to say, next year is going to be just as ugly as this year.”

Currency depreciation and productivity improvements may keep costs low in exporting countries such as Australia.

“Prices may need to fall to the $40-a-metric ton range to prompt some of these miners to reduce output,” Andrew Cosgrove, a Bloomberg analyst said.

The supply overhang may be whittled to 89 million tons by 2017.

Thermal coal at the port of Newcastle in Australia, a global benchmark, dropped to $53.23 a metric ton in the week ended November 27, according to Globalcoal.

Prices are down 14% in 2015.