Monday, February 11, 2008

Thermal Coal Prices Rise in Newcastle as Chinese Supply Drop

by Michelle Roberts

The recent snowstorms in China have adversely hit the prices of thermal coal. The Newcastle port of Australia which is used as a standard for Asia in this matter has recorded increasing rise in the prices of thermal coal. The prices for the thermal coal continued to rise for the third week in a row. The Chinese snowstorms have affected the export of coal which in turn affected the power coal supply not only for Australia but also for South Africa. The prices of the power station coal at the port of New South Wales saw an increase of almost 7.8% prices stood at $125.48 a metric ton for the week that concluded on the 8th of February. These figures for the rise in the prices of the power station coal were based on the global Coal News Index. In the year 2007 the price rise for the thermal was almost 73%. The thermal coal prices in Europe and South Africa also rose sharply due to the decline in the Chinese thermal coal exports. The disruptions in the Chinese exports of thermal coal are now halted till April with the worst ever snowstorms in fifty years that hit China.

The blackouts in South Africa have also crippled the production in mine. Since Australia is the biggest power coal exporter one of the four miners called BHP Billiton Mitsubishi Alliance has issued warning to customers that the coal shipments might be delayed. The rise in the prices of the thermal coal at the Newcastle Port is mostly due to the drop in the Chinese coal exports and there is even news that there will be a complete ban on the coal export in China which will further worsen the situation. If the ban takes effect the Asia-Pacific coal market will have to do away with four to five million tons of power station coal according to Gerard Burg who is the minerals and energy economist at National Australia Bank Ltd. in Melbourne. The power coal market was already reeling under pressure and this situation will make the situation far worse. The Newcastle port of Australia is biggest export harbor for the thermal coal in the world and the port website stated that coal shipments from the harbor increased to 21%. The coal loadings at the harbor increased from 1.47 million tons to 1.78 million tons. The port authorities also said that there were still 41 vessels waiting to be loaded.

The buyers and suppliers of the thermal coal will be negotiating on the prices of annual contract with effect from 1st of April and the price increase in the thermal power coal comes at this crucial moment. Banks like Citigroup Inc., UBS AG and JPMorgan Chase and Co have increased their estimates for the contract price of the power coal for the year that begins on the 1st of April. UBS’ estimate for the power coal is $100 a ton, while Citigroup’s estimate stands at $100 a ton.

 

 

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