“Lower than expected spot prices in recent months are should place downward pressure on contract prices in upcoming negotiations – with the new Japanese financial year commencing in April,” NAB said in its latest Minerals Energy Outlook issued last week.

NAB forecasts contract prices to drop to $US58 a tonne, down from $67.80/t this year.

On the local scene, Australian exports of thermal coal were almost unchanged last year, increasing by just 0.4% to 201 million tonnes.

The rate of growth declined across the year, and NAB expects the weak market conditions across Asia to restrict export growth again in 2016.

The active Newcastle contract on the Intercontinental Exchange briefly dipped below $50/t in mid-January – the weakest level since November 2006 – before edging back over the $50 mark.

Yet there was more positive news on the east coast last week when Platts’ analysis of PWCS shipping data revealed Newcastle coal exporters at the Port Waratah Coal Services terminals shipped their largest monthly volume of cargo to India last month at 383,000Mt, compared to India's nil offtake in January.

“Indian buyers apparently stepped in last month to fill some of the gap left by Chinese buyers absent for the Lunar New Year holiday in China in mid-February,” Platts said.

“India is one new market for Newcastle thermal coal, however, it is growing from a very low base.”

NAB believes the key driver of weaker market conditions has been declining demand from key thermal coal importers, starting with China, whose thermal coal imports fell considerably in 2015, down by 32% to 156Mt, the lowest level since 2010.

“Weak conditions in the industrial sector, particularly electricity generation and cement manufacturing, and pollution concerns are continuing to impact and are likely to constrain thermal coal imports in 2016,” NAB said.

The bank also believes weak electricity demand and LNG's inroads in the country's fuel mix will constrain Japanese thermal coal imports this year.

“Higher cost producers have been gradually forced from the market since 2013, and further cuts from major exporters are likely given the weakness in demand,” NAB said of the thermal coal sector.

Meanwhile, NAB noted that Indonesia’s domestic consumption was increasing while many producers were struggling for profitability in the lower price environment.

The Indonesian Coal Mining Association has suggested that exports would fall below 300Mt this year – continuing a decline that started in 2014.