Asia Coal-Prices rise above $52 on demand, port congestion

Benchmark Australian spot thermal coal prices rose above $52 a tonne from a week ago, lifted by Asian utilities’ appetite for bituminous coal and buoyed by more buying in the spot market as ship queues continue to swell.

Thermal coal, used for power generation, rose $0.95 from a week earlier to $52.36 per tonne, the globalCOAL NEWC index showed on Tuesday, based on free-on-board (FOB) prices loaded at the Australian port of Newcastle.

“Prices are going up because of strong demand for Australia’s bituminous coal. And there is lesser supply in the market since China is now exporting less and Indonesia’s coal is mostly of lower quality,” said a trading source.

The source added that long queues at Newcastle have also prompted more buyers to turn to the spot market for additional tonnages, driving up prices.

Analysts said if spot prices were to stay firm at above $52 per tonne in the coming weeks, it would give a strong boost to 2007 term contract prices as spot prices at the time of negotiations are often used as benchmarks.

“But there is still reason to expect FY2007 contract prices to be lower than last year’s $52.50 if spot prices fall by the end of winter at the end February,” said Clyde Henderson, manager at Hill and Associates.

Encouraged by rising demand from Asian utilities and supply constraints, sources at key Australian thermal coal producers have said they were looking to raise Asian thermal coal contract prices in 2007.

Coal exports at Newcastle, the world’s biggest coal-export terminal, declined by 15 percent, or 299,000 tonnes, in the week ended Feb. 5 over the previous week to 1.656 million tonnes, data from the port showed.

The average waiting time at the port fell by half a day from the week ended Jan. 29 to 19.94 days, while queues lengthened by two vessels from the previous week to 51 ships.

With profits hit by lower shipments and spiralling demurrage costs, Australian producers such as Coal & Allied Industries Ltd. have formed a working group to study proposals to reduce queues.

Some producers such as Xstrata XTA.L are calling for the reinstatement of a port allocation system which would tie shipments to production capacity.

Australia is the world’s second-largest exporter of thermal coal after Indonesia, exporting 79.8 million tonnes in 2006, largely from Hunter Valley mines operated by Rio Tinto and Xstrata.

Source: Reuters