Asia Coal-Australian thermal eases with crude oil

Spot Australian thermal coal prices eased over the past week as oil receded from record-high levels, but were supported near recent highs by interest in spot cargoes from northern hemisphere buyers suffering a hot summer.

“On a short-term basis we’re seeing a clear correlation between thermal coal and oil given they represent alternatives in terms of electricity generation,” said Andrew Harrington, resources analyst at ANZ Bank in Sydney.

Thermal coal, used for power generation, eased 12 cents or 0.2 percent to $52.64 per tonne in the week ending July 21, the globalCOAL NEWC index showed, based on free-on-board (FOB) prices loaded at Australia’s Newcastle port. Prices for the week were 0.4 percent above the overall June average of $52.44.

Analysts said higher-than-average temperatures across the northern hemisphere were driving spot thermal coal demand globally as air-conditioners crank up, driving peak power production.

“Traditionally electricity peaks have come in winter, related to survival,” said ANZ’s Harrington. “But that’s now slowly shifting to summer, related to comfort, although Europe, where temperatures have been exceptional, still lags the United States and Asia in terms of air-conditioner usage.”

Australia is the world’s second-biggest exporter of thermal coal after Indonesia, shipping 108 million tonnes in 2005, largely from Hunter Valley mines operated by global giants Rio Tinto (ASX: RIO.ax) , Xstrata XTA.L and BHP Billiton (ASX: BHP.ax) .

Prices have surged from below $40 in late 2005 as China keeps a greater share of its production for domestic use, demand from importers soared through a cold winter and exports from Indonesia and South Africa were disrupted by heavy rains and rail strikes.

A prolonged period of high spot prices has coincided with lengthy negotiations between Australian producers and Japanese power companies on benchmark pricing contracts for the Japanese fiscal year, which began in April, with indications pointing to rollover contracts on the previous year’s high prices.

Coal shipments at Australia’s Newcastle port, the world’s biggest coal terminal dipped from last week’s nine-month high as fewer ships entered the terminal. Shipments dipped to 1.363 million tonnes of coal, down about 474,000 tonnes.

(Reuters)