Spot-price buy­ers chase Hunter coal

The Weekend Australian - Travel - - Resources -

THE spot price of coal at Aus­tralia’s New­cas­tle Port may sur­pass the record as rain hin­ders out­put in In­done­sia, Chi­nese ex­ports drop and Ja­pan’s de­mand in­creases fol­low­ing the shut­down of a nu­clear plant.

Coal for im­me­di­ate de­liv­ery at New­cas­tle, the world’s largest ex­port har­bour for the fuel, jumped 3.3 per cent to $72.37 a tonne in the week end­ing Au­gust 10, ac­cord­ing to the glob­alCOAL NEWC In­dex. That’s above the pre­vi­ous record of $70.88 reached in June, and the third con­sec­u­tive weekly gain.

‘‘ We have been bullish on ther­mal coal for over a year now, avail­abil­ity is an is­sue,’’ said Lon­don-based Daniel Breb­ner, ex­ec­u­tive di­rec­tor of com­mod­ity re­search at UBS AG. ‘‘ More rain in In­done­sia sup­ports our call’’ for higher prices, he said.

Asian cus­tomers, in­clud­ing Ja­pan and South Korea, are count­ing on sup­plies from In­done­sia to fill the gap left by fall­ing ex­ports from China, which may re­sult in the with­drawal of at least 25 tonnes a year from the mar­ket. Aus­tralia, the sec­ond-largest ex­porter of ther­mal coal, is strug­gling to in­crease ship­ments be­cause of port and rail bot­tle­necks.

Straits Asia Re­sources, Banpu and PT Gu­nung Bayan Prata­ma­coal have warned they may miss con­tracted de­liv­er­ies from mines in In­done­sia, the world’s big­gest ex­porter of the pow­er­sta­tion fuel.

China has turned this year into a net im­porter as it in­creases do­mes­tic con­sump­tion. Tokyo Elec­tric Power is boost­ing coal-fired gen­er­a­tion af­ter a July 16 earth­quake forced the util­ity to shut the world’s largest nu­clear power sta­tion.

‘‘ There’s been a very strong mar­ket in the last few weeks and we’ve seen a bit of con­cern around the Ja­panese nu­clear power sta­tions, which means they’ll be us­ing more oil-fired and coal-fired sta­tions while that gets sorted,’’ Andrew Har­ring­ton, a com­modi­ties an­a­lyst at the ANZ bank said in Syd­ney.

The Kashi­wazaki-Kariwa plant’s seven re­ac­tors were taken off-line on July 16 af­ter a mag­ni­tude 6.8 earth­quake sparked a fire and led to ra­dioac­tive ma­te­rial leak­ing.

‘‘ Ro­bust long-term de­mand trends in Asia Pa­cific should keep ther­mal coal sup­pli­ers strug­gling to keep pace,’’ UBS’s Breb­ner said early this month. ‘‘ Sup­pli­ers such as In­done­sia al­ready have a de­cel­er­at­ing pro­duc­tion profile.’’ In­done­sia could add 15 mil­lion tons of coal to the Asian mar­ket this year, ‘‘ how­ever it pales in com­par­i­son to the 45 mil­lion tonnes or so added in 2006,’’ Breb­ner said.

China, which be­came a net coal im­porter for the first time this year, bought 27.07 mil­lion tonnes from Jan­uary to June, an in­crease of 48 per cent. Over the same pe­riod, ex­ports dropped 28 per cent to 23.12 mil­lion tonnes. China will have net im­ports of 18 mil­lion tonnes next year and 34 mil­lion tonnes in 2009, UBS es­ti­mates.

‘‘ We ex­pect 2008 to be a tighter year for coal than 2007, driven by ris­ing im­ports from China and In­dia,’’ Credit Suisse Group an­a­lysts said in a re­port. ‘‘ The fact that coal re­mains the cheap­est source of en­ergy ver­sus other forms im­plies con­tin­ued shifts to coal in the en­ergy mix.’’

Spot prices were likely to con­tinue to in­crease, said Ger­ard Burg, min­er­als and en­ergy econ­o­mist at Na­tional Aus­tralia Bank in Melbourne.

‘‘ Coal pur­chasers would be likely to seek al­ter­na­tive coal vol­umes, most likely from Aus­tralia, to re­place the lost In­done­sian pro­duc­tion,’’ said Burg. ‘‘ This should drive the New­cas­tle spot price higher.’’

Ship­ments from New­cas­tle, which ac­counts for about a third of Aus­tralia’s coal-ex­port ca­pac­ity, fell 0.6 per cent last year to 79.8 mil­lion tonnes, miss­ing a tar­get for a 9.6 per cent in­crease. Fifty-five ships were wait­ing to load coal, up from 51 a week ago, New­cas­tle Port said.

Coal was the world’s fastest grow­ing en­ergy source as high oil prices prompt a switch to cheaper fu­els, the US En­ergy In­for­ma­tion Ad­min­is­tra­tion said. Coal’s share of to­tal world en­ergy might climb to 28 per cent in 2030, from 26 per cent in 2004, the agency said in a re­port last month. Bloomberg

New­cas­tle: Busiest coal ex­port port

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