COLUMN-Coal’s blind optimism fades, but industry must shrink to succeed – by Clyde Russell (Reuters U.S. – October 20, 2015)

Oct 20 (Reuters) – Battered and beaten, the coal industry finally seems to be moving from blind optimism that things will somehow get better to a more realistic hope that it can survive, albeit in a smaller, less influential manner.

A common theme at coal conferences over the past few years is that prices have finally reached a bottom and that a recovery is just around the corner.

Given that global coal benchmarks are currently in their fourth consecutive year of declines, this has clearly been an optimistic view, based more on fervent hope than a sober analysis of the state of the industry.

But at the World Coal Leaders Network conference in Barcelona this week there appeared to be a greater acceptance of coal’s diminishing role in power generation, the rising political and environmental obstacles the fuel faces and an acceptance that low prices are here to stay and the glory days ended in 2011.

There were even a few analysts and industry leaders prepared to say that prices have reached, or are very close to the bottom of the cycle, but these cautiously optimistic views came with enough caveats to ensure that ‘bullish’ still isn’t a word used very much in the coal world.

The first, and possibly most significant caveat is that a bottom in prices doesn’t imply that a rally is the next step.

The price of thermal coal at Australia’s Newcastle Port has dropped this year, losing some 15 percent since the end of the first quarter to currently trade around $53 a tonne.

While this is a drop of about 60 percent from the post-2008 recession peak reached in February 2011, what is important is that Australian spot coal seems to be able to hold above the $50 a tonne level.

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