Credit Suisse First Boston analyst Peter O'Connor forecast an average price cut of between 7.5% and 26% for thermal coal, Reuters reported from the McCloskey's Australian Coal Forecasting Conference taking place in Sydney this week.
Thermal coal has recently been trading at around $US39.50 per tonne through the port of Newcastle. The spot market is down from $US41.90/t a month ago and $US51.15/t a year ago.
McCloskey told Reuters a South African spot sale at $US44/t indicated the market may have just bottomed.
In mid-November Bloomberg reported Switzerland-based Xstrata agreed on four one-year contracts with Taipower for next year, at about $US40/t excluding insurance and freight costs.
Reporting on the conference the Australasian Investment Review said freight rates could be expected to fall in 2006 due to capacity increases.
This offered an opportunity for Australian producers as little coal is currently sent to the European market, largely as a result of cheaper coal exports from South Africa.
AIR said broking company Merrill Lynch pointed out that the differential in premiums between South African and Australian coal was now greater than the freight rate, meaning more exports to Europe are likely.