Revealed in its report released on Wednesday, Citi slashed its Newcastle-exported thermal coal price forecasts across the board.

Its new forecast for the present (March) quarter was $US56/t – down from its previous expectation of $70/t for this period.

Citi also cut its June quarter forecast from $68/t to $53/t, its September quarter forecast from $65/t to $53/t and its December forecast from $65/t to $56/t.

The Russian rouble, which has sunk in tandem with the global plunge in oil prices, has played a role as European coal prices in rouble terms put Russian export margins on par with the coal boom times of 2011.

“This is putting intense pressure on Atlantic basin markets as Russian producers flood the market with cheap coal,” Citi said.

The investment bank did note that the weaker Australian dollar had potentially lowered the Newcastle-exported thermal coal cost curve by $US10/t.

But it also viewed this might just provide some additional breathing space as supply increases, with South Africa expected to further target Pacific thermal coal markets in response to the “tough Russian competition” in its traditional Atlantic market.

“Thus, [Australian thermal coal] producers will be able to endure greater price declines before margins bite sufficiently to force curtailments, a dynamic we expect will need to play out given an expected 30 million tonnes of new export supply in 2015,” Citi said.

The bank also lowered its spot coking coal forecasts for 2015.

Its new forecast for the present (March) quarter was $108/t – down from its previous expectation of $112/t for this period.

The June quarter forecast was reduced from $117/t to $110/t, its September quarter forecast fell from $125/t to $114/t and its December quarter forecast fell from $135/t to $120/t.

On metallurgical coal, Citi said it had become apparent that costs for major exporters had fallen significantly over the past six months.

“In fact, modelled costs have fallen by roughly $15 in USD terms for Australian and North American exporters, and $40 for Russian exporters,” Citi said.

“However, such improvement is likely to limit the likelihood of further production curtailments. Our previous expectation of a rally in met coal prices may thus be played out in large part via margin expansion rather than increased headline prices.”

In terms of exporting met coal to the Chinese market, Russian producers were seen as the biggest winners from falling costs and its weaker currency.

“Looking at weighted average costs by country, Russian producers now appear to have a roughly $20/t edge on average over Australian producers and even larger advantages over North American producers,” Citi said.