CAPE TOWN (miningweekly.com) - Australia-based financial institution Macquarie indicated on Thursday that the outlook for the global coal industry, at least in the short term, was significantly bleak.

Senior commodities strategist Jim Lennon said that there was no question that the global financial crisis had impacted on the demand for coal, especially coking coal.

The slowdown of the western world and emerging market economies had resulted in a significant reduction in demand for commodities.

Lennon continued that this was particularly relevant to the steel industry, which was a significant consumer of coking coal.

Global steel production had fallen by 35% in the past six months and, more notably, order books of major steel producers had decreased by 50%.

This was one of the most serious downturns that had ever been experienced by the global steel industry, said Lennon.

In addition to the slowdown in demand, Lennon believed that the improved supply of coal, led by China and Australia, were major factors in pressuring prices.

Lennon elaborated that coking and thermal coal prices had retreated as hard and fast as other commodity prices, adding that there had been a bubble in the prices.

In fact, Lennon believed that the significant drop in coal prices during the last six months should be considered as a correction in the prices from the excessive highs of last year.

In terms of the outlook for coal prices, Lennon stated that it had been very difficult to forecast accurate prices during the past six months.

However, he anticipated that coking coal would settle near $100/t, which was a 40% decrease from last year’s prices.

Thermal coal prices were expected to experience a similar drop of 40% to $75/t.

However, Lennon optimistically stated that there were glimmers of hope that the slowdown in the Chinese economy, which was fundamental to supporting global commodity demand and prices, could be easing and would stabilise at levels of 8%.

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