Update | Coal prices in Asian seen jumping as cuts in China collide with rain spawned by La Nina

Prices at the Australian port of Newcastle, an Asian benchmark, may increase to US$90 a tonne if La Nina rainfall hinders Australian and Indonesian output, analysts led by Ed Morse wrote in a note e-mailed Monday.

China’s steep production cuts are simultaneously raising demand for seaborne coal, they wrote. Prices have risen 19 per cent so far this year to about $60 a tonne, according to globalCOAL, following five years of declines.

“We are now bullish on short-term thermal coal prices,” the Citigroup analysts wrote. “Coal demand could prove to be more robust than commonly thought. China’s coal production cut is also key to a tighter balance.”

Coal, one of the least loved commodities by analysts because of an oversupply and China’s efforts in cutting use of the dirty fuel to fight pollution, is now looking more favourable.

Bank of America analysts led by Peter Helles raised price forecasts for Newcastle coal for the second half of this year to $59, from an earlier projection of $46.50, the bank said in a note July 1. Citigroup expects prices to average $61 a tonne in the first quarter of 2017.