LAUNCESTON, Australia: The new year has started positively for Asian coal, with prices rallying from a 5-1/2 year low, Chinese imports jumping to the highest in 11 months and renewed merger and acquisition interest.

While these are undoubtedly welcome developments for a sector that has witnessed four years of falling prices, there are still serious questions as to whether these swallows really do indicate a summer of good fortune ahead.

The spot price of thermal coal at Australia's Newcastle port, an Asian benchmark, rose to $62.91 a tonne in the week ended Jan. 16, up 3 percent from $61.04 the prior week, which was the lowest since April 2009.

The obvious caveat here is that prices are still some way below the breakeven point for many miners in top exporters Australia and Indonesia, and it will take weeks of sustained gains to bring the sector as a whole back into the black.

Chinese imports were 27.22 million tons in December, the highest since January last year, again a positive sign but not enough to mask that imports for 2014 as a whole were down 10.9 percent to 291 million tonnes, the first annual drop in a decade.

The main problem for miners exporting to China is the uncertainty gripping the industry in the world's biggest consumer, importer and producer of the fuel.

This is well illustrated by the imposition of the new coal quality standards this year, which sees limits imposed on sulfur and ash content.

The problem is that some industry sources report the new rules aren't being applied universally, with certain cargoes being singled out and others not being inspected, and differences in the stringency of inspections at various ports.

The Minerals Council of Australia Chief Executive Brendan Pearson was quoted by the Australian Financial Review on Jan. 12 as saying there appears to be some game-playing by Chinese officials over the new rules.

He also raised concern that the regulations were being used to favor domestic coal miners, who have also struggled with low prices and some 70 percent are reputed to be unprofitable at

current prices.

Chinese importers are also demanding quality guarantees, which pushes the cost of a rejected cargo onto the seller.

These may just be teething problems for the new system, but they are likely to put pressure on Chinese imports of coal.

Coupled with modest growth in thermal power generation and the desire of authorities to limit coal consumption in order to lower pollution, and it's hard to paint a bullish picture for Chinese coal imports.

If the world's largest importer of coal is a problem area, is there enough hope being generated by the rest of Asia? And here eyes turn to India.

There is little doubt that India needs the coal, given the ongoing problems of state-controlled behemoth Coal India to meet production targets and the South Asian nation's ambitious electrification program.

However, Prime Minister Narendra Modi's government has shown its willingness to push ahead with reforms to the sector, including opening it up to private miners.

Ultimately, these reforms could act to boost domestic output and limit the expected shortfall in coal supply, which the government pegged at as much as 265 million tons by the 2016-17 fiscal year.

India imported 210.6 million tons of coal in 2014, a gainof 19 percent over the prior year, according to online trader mjunction.

From a demand perspective, imports could easily rise again in 2015, the only limiting factor being the infrastructure necessary to shift coal from ports to power plants where it is needed, and the regulated electricity pricing that renders burning imported coal uneconomic.

While it seems likely that India's coal imports will increase, it's also doubtful that they will grow by enough to create a demand-driven revival in prices.

This is especially the case given the uncertainty over the outlook for Chinese import demand, and the picture from the rest of Asia's buyers of steady, but unspectacular growth in coal demand.

The increase in M&A activity by Japanese companies in recent weeks has also been viewed as a potential turning point in coal's fortunes.

Recent acquisitions include the first coal investment by Mitsui & Co. in 10 years. It is purchasing a stake in a Mozambique mine operated by Brazil's Vale, at a cost of $763 million and a commitment to spend another $190 million to expand the operation.

But rather than signal an imminent turnaround in coal's fortunes, the M&A activity confirms that assets in the sector are cheap and of interest to long-term players, such as Japanese trading houses.

What has changed in 2015 is that there are a few bright spots for coal, whereas in recent years the news and sentiment has been overwhelmingly negative.

If anything, this points to a bottom being reached for prices, rather than any rally, a situation likely to persist for as long as supply outweighs demand, as is currently the case.

— Clyde Russell is a Reuters columnist. The views expressed are his own.