U.S. expected to lead global consolidation trend in coal

* Unrealistic asset price ideas prevent many deals until now

* Australia and Indonesia potential consolidation hot spots

By Sarah McFarlane

NICE (Milan: NICE.MI - news) , May 20 (Reuters) - The coal industry is expecting a wave of consolidation, led by the U.S. market, as years of depressed prices take their toll, with no relief in sight.

The coal market has been in oversupply since 2012, after decisions in better times on expansions and new projects boosted global output, while demand failed to keep pace.

In the United States, said traders and analysts, some of whom gathered this week at the IHS European coal conference, the dollar's strength has hampered global competitiveness in addition to other domestic challenges, prompting potential deal activity.

"The coal industry in the U.S. is under a lot of pressure for various reasons, there's been a perfect storm of regulatory issues, competition from gas, and low global prices," Anna Zubets-Anderson, analyst at ratings agency Moody's, said in a phone interview.

U.S. generators expect to shut about 22,000 megawatts of coal-fired generation in 2015 as relatively weak power and gas prices in recent years have made it uneconomical to upgrade old coal plants to meet stricter environmental rules.

"It's just a question of how long these stressed companies last," Zubets-Anderson said.

Traders and miners said that until recently asset owners had unrealistic ideas about valuations, although this was now starting to change on diminished confidence about a turnaround in prices.

"There are many things on the chopping block, I would say generically speaking some of those assets haven't reached their natural value, the Australian assets are only just starting to get re-priced now," said Paul Vining, chief executive of U.S.-based Cutlass Collieries, a Cline Group company.

Cline Group recently acquired a stake in Canada's Donkin coal mine and has a second acquisition pending, of Australian and Canadian listed company Coalspur Mines, Vining said.

"I'd say over the next 12 to 24 months you'll see a lot of M&A activity, certainly in Australia, both related to thermal and metallurgical operations," Vining said.

Australia and the U.S. are among the world's top five coal producers, along with another potential consolidation hot spot, Indonesia.

Speaking at the conference, Philip Gasteen, head of marketing, sales and logistics at BMS Coal Sales Pte Ltd, whose Indonesian subsidiary exported 29 million tonnes of coal in 2014, said everything was for sale in Indonesia.

"We have not had, until recently, a general view in the market that coal is not going to recover sometime in the not too distant future...today there's uncertainty," he said. (Reporting by Sarah McFarlane; Editing by Christian Plumb)