LONDON: Thermal coal prices are unlikely to rise over the next two years due to oversupply and stagnating demand, with analysts forecasting prices in a range of $70-85 per tonne.

Prices of coal for use in power generation have dropped around 40 per cent during the last three years due to healthy supplies and slowing demand in Europe and China.

“We cannot see prices gaining ground anytime soon, with short-term risk more to the downside and sustainable upside capped above $80 per tonne into 2016,” South Africa’s Standard Bank said in a research note.

“The thermal coal market remains well supplied. Coal supplies to Europe will increase as Drummond (in Colombia) ramps up its ... load facilities. Other Colombian suppliers are also increasing shipment rates, leading to an improving 6-10 million tonnes run-rate from Colombian miners across Q2,” the bank added.

At the same time, low industrial growth rates across Europe as well as the expansion of renewable power capacity especially in Germany are expected to keep a lid on demand growth.

The share of renewable energy in national electricity consumption rose by 4 percentage points to 27pc in the first three months of 2014 compared with a year earlier.