“In this note we update our views on supply and demand and the price outlook, given Chinese protectionism and the macro moves of the past nine months,” the broker said.

“We conclude that, barring a large reversal in the oil and foreign exchange markets, there is probably $10/t of downside to current spot prices.”

Job losses have piled up as the coal downturn continues, yet the broker says cost deflation caused by a strong US dollar and falling oil prices over the past nine months have helped non-US coal miners stave off production cuts.

“We estimate that only 15% of the seaborne thermal coal industry is losing money on a cash basis,” Macquarie said.

While it said the thermal coal market remained oversupplied, the fall in Chinese demand was seen as another big problem.

Blaming Chinese protectionism measures for its largely state-owned domestic coal industry – in reference to coal import tariffs and coal quality restrictions introduced in the second half of last year – Macquarie said Chinese seaborne thermal coal imports were about 50% lower year-on-year so far.

The largest thermal coal production cuts were credited to Indonesia and more cuts were considered likely from this nation’s small to medium size exporters.

“One must remember that the majority of Indonesian mining costs are US dollar-denominated and hence their competitive position has deteriorated over the past nine months,” Macquarie said.

“On top of that, when looking at ease of supply cutting globally, Indonesian producers are, notwithstanding the fact that many are highly indebted, probably top of the list because they aren’t as burdened by infrastructure and other labour-force related liabilities.”

Macquarie said it was clear to all market participants that India was the main demand growth story in thermal coal.

While the broker believed there was a consensus view that one should remain “cautiously optimistic” on Indian imports, it also warned there were signs that Indian domestic supply might be getting its act together.

The dramatic increase in Russian cost competitiveness was also a key issue, with Murmansk exporting coal priced around $50/t free on board.

“But underlying Russian inflation was put forward as a reason for why Russian competitiveness wouldn’t improve further, while other transportation and infrastructure constraints (aside from the recent Kuzbass landslide), and stronger domestic demand (+13% year to date) should mean that

Russian export growth is small this year,” Macquarie said.

Newcastle spot thermal coal prices were $55.4/t as of Monday.