Spot-price buyers chase Hunter coal
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