In Europe, thermal prices have rallied from around $US72 ($A76.7) a tonne three months ago to recent sales at $US80/t.

In Australia, prices for hard metallurgical coal have been set at $US152/t, which was a weak result though not as weak as feared, while PCI coal has been selling for around $US121/t, which is a rise of around $US4/t.

At first glance those price movements might be seen as unexceptional but at least they’re trending in the right direction.

A second glance reveals that prices probably have no further to go because of the biggest problem confronting the world’s coal sector – over-supply.

In other words, even if it is hardly champagne-time, this might be as good as it gets for coal prices until more high cost mines are mothballed and more mining companies replicate what Glencore Xstrata recently did in abandoning its Wandoan project.

When The Hog decided to take a look at coal pricing earlier this week he was initially surprised by the news from Europe and an analysis by researchers at Macquarie Bank that was headed: “Euro thermal coal at a bottom?”

The words in that headline are certainly optimistic. The question mark at the end is the worry, as the Macquarie analysts explained.

According to their studies of the European market thermal coal prices started to “emerge out of their slump” in the past week or so with a price approaching $US80/t, an encouraging move up from $US72/t but really only back to levels seen in May.

The upward trend is expected to continue with Macquarie noting, in classic investment bank jargon, that “the upside risk to Euro thermal coal prices exceeds the downside”

De-coded, the bank reckons thermal prices in Europe could continue to edge up, reaching $US83.50/t next year.

Positive factors at work include coal exports from the US continuing to decline and a number of coal-fired power stations expected to come on line in Holland and Germany over the next few quarters.

But after that the good news starts to dry up because not only is the overall coal market over-supplied, a rise in price back towards the $US85/t to $US90/t mark will make US central Appalachian coal economic again and effectively impose a price ceiling.

There have been predictions in the past that the thermal coal price has finally reached a bottom, only to have the price slide away further as highly marginal, and even loss-making mines, are kept in production.

There are other factors bearing down on the European market, not least being central government directives that are forcing the closure of some high polluting power plants and changed buying habits by electricity producers who are opting to maintain smaller stockpiles because they are confident of abundant supply.

The picture in metallurgical coal is a near mirror image with strong global steel production, and a surprisingly high iron ore price expected to flow through to steel-making coal but failing to do so.

“In a year that has seen global steel making output surprise on the upside, metallurgical coal has been the poor cousin among steel-making raw materials,” Macquarie said.

“The expected recovery towards the $US190/t to $US200/t range widely expected has not transpired with the third quarter and fourth quarter contracts the lowest since the system began in 2010.”

Just as with thermal coal, the most recent price settings for metallurgical coal have been surprisingly good, with the $US152/t described as better than expected.

But, there does not seem to be much encouragement for a continued improvement even with the removal of an estimated 70 million tonnes of Chinese metallurgical coal from the market, a mid-year move that restored some balance.

Despite the encouragement of high cost Chinese coal leaving the market there is an expectation that more production will have to be mothballed before true market stability and higher prices can be achieved.

Macquarie expects the metallurgical coal market to start tightening up again in 2015 and 2016 when it expects a modest supply shortfall of 1 million and 5 million tonnes respectively.

However, by 2018 the glut returns with a 3Mt surplus bearing down on the metallurgical coal price.

Whoever it was who said life wasn’t meant to be easy must have been a coalminer.