COAL prices in Asia are showing little sign of recovery after the biggest quarterly decline in a year amid subdued demand and increasing supply from Australia and Indonesia, the world’s largest exporters.

Prices of coal at the Australian port of Newcastle, the Asian benchmark grade, may trade between $80 and $90 a metric tonne for the rest of the year, according to UBS, while Bank of America forecasts an average $86 a tonne this year, down from an earlier estimate of $92. Coal has dropped 7.5% to $81.20 a tonne in the second quarter, the most since the three months ended June last year, IHS McCloskey data show.

Glencore Xstrata, the world’s biggest shipper of the fuel, and Peabody Energy Corporation, the largest US producer, are among miners cutting workforces to cope with escalating costs and falling prices as exports from Australia, Indonesia and the US climb. Supplies are forecast to rise at least 30-million tonnes as new mines start this year, data compiled by UBS show. About 15% of Australia’s coal is extracted at a loss when prices fall below $90 a tonne, says CIMB Group.

"The market has been impacted by oversupply, particularly from Indonesia, Australia and the US," says Daniel Hynes, the Sydney-based head of commodity strategy at CIMB. "For the next couple of months, it looks like things will remain relatively weak. There is still a little bit of risk to the downside for prices," he says, predicting prices may climb to $95 a tonne by the end of the year.

Coal at Newcastle has dropped 10% last year, extending a 19% slump last year, the most since 2005, according to IHS McCloskey, a Petersfield, England-based data provider. It fell 17% in the second quarter of last year as exports rebounded after rain swamped mines and rail lines in Australia.

The market was being affected by "crippling oversupply and subdued demand", Bank of America analysts including Sydney-based Peter O’Connor said in a June 20 note. The worst was not over for thermal seaborne coal, and low prices might be necessary to force production cuts, the bank said.

"Even though there have been cutbacks in some supply, it has been at the margin and more mines have been opening," says Daniel Morgan, a commodity analyst at UBS in Sydney. "It’s a well-supplied market at the moment."

Australian exports have climbed 11% to 56.4-million tonnes for the four months ended April, compared with the year-earlier period, according to UBS. Shipments from Indonesia, the world’s biggest seller, rose 6%, while US exports gained 10%, UBS said last week.

The outlook was "grim" for mining as companies adapted to lower prices and weakening demand, Anglo American CEO Mark Cutifani said at a conference on Wednesday in the Australian capital of Canberra.

Glencore Xstrata halted work on the Balaclava Island export terminal in Queensland last month, citing market conditions, including overcapacity. The Baar, Switzerland-based company also shut its Brisbane, Australia office in March after saying in September that it planned to cut about 600 jobs.

Glencore Xstrata is still scheduled to start production this year at three Australia mines with total export capacity of 12.5-million tonnes, according to UBS.

St Louis-based Peabody has taken control of most of its Australian sites from contractors to limit losses, it says in its first-quarter earnings statement in April. Early-stage projects continue to be deferred, with timing dependent on market conditions, the company says.

"We’re still fairly confident by the end of the year we’ll see prices higher from here," Mr Hynes says. "It will just be a long grind up over the course of the second half. There is still a modest recovery in place at the moment through emerging markets and the US, which will be supportive of industrial growth, and we should see coal demand pick up."

Growth in China, the world’s biggest consumer of coal, might accelerate by the end of the year, Jun Ma, chief economist for Greater China at Deutsche Bank, said at a conference in Hong Kong on Tuesday.

Newcastle prices may average $92.70 in 2013, according to the median estimate of 11 banks compiled by Bloomberg, including Credit Suisse, Société Générale and Westpac Banking. The fuel has averaged $88.78 this year.

The market would remain well supplied in the short term, with a lack of "producer discipline", especially among Indonesian miners, Lucky Ariesandi, an analyst at Maybank Kim Eng Securities in Singapore, said in a report on Monday. Production cuts in Indonesia are imminent as miners could maintain low strip ratios only for a limited time before being forced to alter long-term plans, he says, reducing his 2013 Newcastle price projection 7% to $88 a tonne.

Supply continued to grow from miners trying to optimis e production while demand remains subdued, Sam Catalano, an analyst at Nomura International in London, said in a June 6 note. If US producers could lower costs, their exports might become more sustainable, he says, reducing his 2013 price estimate 9% to $90 a tonne.

US exports are projected to rise 10% to 55-million tonnes this year, according to a report today from Australia’s Bureau of Resources and Energy Economics. Indonesian shipments are forecast to gain 6%, while Australia sales would rise 7%, the Canberra-based bureau says.

"We don’t have a whole lot of confidence in a near-term uplift, but we don’t think prices are headed for an imminent collapse," says Joel Crane, vice-president of research at Morgan Stanley.