The surplus will swell by 20 percent to 6 million metric tons next year, Credit Suisse Group AG says. Prices at Newcastle in Australia, an Asian benchmark, rose 12 percent to $85.67 a ton from the low on Sept. 6, data from globalCOAL show. Coal will average $84 in 2014, according to the median of nine analyst estimates compiled by Bloomberg.
Glencore Xstrata Plc, BHP Billiton Ltd. and Whitehaven Coal Ltd. are among producers scheduled to mine more next year, adding tonnage equivalent to 3 percent of global trade, data compiled by Bloomberg show. The extra supply will coincide with the slowest demand growth in three years from China, the biggest buyer, according to Morgan Stanley. The nation already accelerated imports in the past several months to stockpile for the winter.
"The market is pretty well supplied," said Daniel Morgan, an analyst at UBS AG in Sydney who expects prices to average about $85 next year. "The recent price support has been driven by pre-winter stocking. After that passes, we go back to the market fundamentals, which is one of very adequate supply."
Coal has been in a bear market since March last year after dropping 20 percent from its peak in January 2011. Prices fell as low as $76.70 in September, 61 percent below the record $194.79 reached in July 2008.
Glencore will boost output of thermal and coking coal by 6 percent to 146 million tons next year, as it completes the development of the Ravensworth North and Ulan West projects in Australia, the Baar, Switzerland-based company said in September. Coking coal is used mostly in steelmaking while thermal grades are burnt in power plants.
An expansion of Cerrejon, Colombia's biggest coal mine, will increase output capacity by 8 million tons to 40 million, BHP Billiton said in October. The project is 79 percent complete, the Melbourne-based company said. The venture is co- owned by BHP, Anglo American Plc and Glencore, the biggest shipper of thermal coal.
New supply from Australia will curb the rally in prices, Paolo Coghe, an analyst at Societe Generale SA in Paris, said in a report last month. He predicted an average price of $84.40 next year. Accelerating demand from Asia toward the end of 2014 could start reducing the glut, he said.
Japanese utilities boosted coal purchases as the country enters winter with none of its 50 nuclear reactors operating, pending safety reviews following the March 2011 Fukushima atomic plant disaster.
Regional power companies in Japan, the biggest buyer of Australian coal, consumed 4.78 million tons in October, a record for the month, according to data released Nov. 15 by the Federation of Electric Power Cos. The industry group started compiling data on the 10 companies in 1972.
"Thermal dependency is going to remain very high" in Japan, Stefan Ljubisavljevic, an analyst at Macquarie Capital in London, said in a report Nov. 26. He doesn't expect the nation's nuclear reactors to reopen until at least the start of 2014.
Prices of seaborne coal may be boosted by demand from China, Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report Dec. 3. Consumption by Chinese power plants last week was the highest since September, he said.
Supplies at the port of Qinhuangdao, the delivery point for about 40 percent of China's seaborne coal, reached 4.9 million tons this week, according to data from the China Coal Transport and Distribution Association. They averaged 6.7 million tons this year. Prices rose to a range of 555 yuan to 570 yuan ($91.12 to $93.58), the highest level since July.
The nation imported 3.29 million tons in October, 60 percent more than a year earlier, the most recent customs data show. China will import a total of 161 million tons in 2014, 8.8 percent more than in 2013, Morgan Stanley estimates. That would be the weakest growth since 2011.
Exports from Indonesia, the biggest shipper of thermal coal, will climb to 420 million tons next year, from 409 million tons in 2013, the Bureau of Resources and Energy Economics, Australia's commodities forecaster, estimates. Australia may ship 196 million tons in 2014, from 184 million this year, the bureau said in a report published in September.
"It's still a heavily oversupplied market," Colin Hamilton, the head of global commodities research at Macquarie Group Ltd. in London, said in an e-mail. He predicts Newcastle coal may average $85 in 2014.
Glencore halted work on the Balaclava Island export terminal in Queensland in May and shelved the Wandoan project. Rio Tinto Group, based in London, is selling its stake in the Clermont mine in Australia. Peabody Energy Corp., the largest U.S. producer, cut costs by reducing jobs and taking control of most of its Australian sites from contractors.
Shares of Whitehaven, which makes all of its sales from coal, advanced 4 cents in Sydney, trimming its decline this year to 49 percent. Rio decreased 0.4 percent, and BHP was little changed at A$36.78.
There is "crippling oversupply and subdued demand," Bank of America Merrill Lynch analysts including Sydney-based Peta Arnott said in a Nov. 26 report. The bank predicts prices will average $82 next year.