Thermal coal contract prices are forecast to increase this year, reflecting import demand from India, Korea, Taiwan and Japan.

Chinese imports are expected to remain steady with domestic production increasing as mines are reopened following the consolidation of the Shanxi coal mining industry.

India is projected to remain one of the fastest-growing thermal coal import markets, with imports expected to double from 2009 to 2015.

Over the medium term, ABARE said coal prices would remain above long-term historical averages of $US65 a tonne in real terms.

Production costs are projected to jump over the medium term as coal deposits which are deeper underground and further away from existing infrastructure are developed.

In Australia, increased export capacity associated with new infrastructure projects is expected to have a significantly higher unit cost compared with existing infrastructure, ABARE said.

Australian thermal coal exports are expected to grow 3% in 2009-2010 and then a further 6% in 2010-11.

Mine production scheduled to commence in 2010, including at Moolarben, Blakefield South and Ashton South East, will underpin this expansion.

Between 2011-12 and 2014-15, Australia’s thermal coal exports are forecast to grow at an average annual rate of 9%.

Mines coming online in that period include Xstrata’s 8 million tonne per annum Mangoola mine and Rio Tinto’s 10Mtpa Mount Pleasant project. Expansions at the Narrabri coal project, Mount Arthur North and Moolarben will also contribute to increased production and exports over the medium term.

For metallurgical coal, demand is expected to remain strong with world trade forecast to increase 9% in 2010 and then to grow 6% each year through to 2015.

ABARE says the three major growth markets for imported metallurgical coal are Brazil, India and China. Imports by Japan and the European Union are expected to gradually recover.

In 2010, Australian exports of metallurgical coal are forecast to increase by 11% to 150Mt, supported by the expansions of the Dalrymple Bay Coal Terminal and the Jilalan Rail Yard.

Projects that may boost Australian production in the medium term include BMA’s 5.5Mtpa Caval Ridge, the 4.6Mtpa Eagle Downs project and the 2Mtpa Lake Vermont project.

Global supply is expected to increase from the second half of this year to 2015 but will depend on the timely development of greenfield projects in Mozambique and Mongolia, ABARE said.