VANCOUVER (miningweekly.com) – Despite a strong rally in steam-making thermal coal this year, which saw prices more than doubling, the global steam coal mining landscape will face continued consolidation on the back of historically weak prices, years of producer losses and increasingly rigid environmental regulations, a research unit of Fitch Group states.

Largest producers China and the US are expected to slowly lose their market shares, while India and Indonesia will increase output for domestic use, analysis by BMI Research shows.

Global thermal coal output will slow on the back of historically weak prices and stringent environmental regulations in the largest producing countries, the top five of which account for about 75% of global output.

BMI believes that the top global producers will remain China Shenhua Energy, Coal India, BHP Billiton and Peabody Energy.

Researchers also expect that lowering capital expenditures, as well as consolidation of low-margin assets, will remain a priority.

Globally, Indonesia, India and Russia will increase their market shares of thermal coal production, with only Russia's additional output destined for the seaborne market. Other large producers, including China and the US, will slowly lose market share.

China will remain the driving force behind global thermal coal output. BMI forecasts that the country will account for 45% of global thermal coal output in 2016, with its share decreasing to 44.3% by 2020. Nevertheless, this is still a steady increase from China's share of only 38.2% in 2005, researchers note.

The US coal industry will continue to decline over the coming years, averaging a 20% contraction in 2016 and a steady decline of 2.5% over 2017 to 2020. As a result of weak demand and low prices, the US coal industry will continue to see divestment, closures, bankruptcy and layoffs over the coming years, according to BMI. This will reduce the country's global share of thermal coal output from 8.7% in 2016 to 7.6% by 2020.

BMI also notes that India will be a global coal production bright spot, with the country increasing global market share of production from 10.1% in 2016 to 13.1% by 2020. In 2016, the country will surpass the US to become the second-largest coal producing country in the world, second only to China, despite remaining a net importer of the mineral.

Meanwhile, BMI expects Australia's global share of thermal coal output to remain steady over 2016 to 2020, at an average of 6.4%, which is slightly higher than the 5.7% market share over 2011 to 2015. The Australian coal industry will experience limited production growth owing to historically weak prices, environmental regulations, and increasing competition from lower-cost foreign producers weighing on production.