Record prices for Australian coal have resulted from recent floods in Queenslandand the Chinese snowstorms. These short-term issues are balanced by longer termissues of increasing demand and improving transport infrastructure. The highprices have pushed the GlobalCoal index to a record $US125.48 on 8 February2008. Australian coal companies are attractive investments due to the high coalprice, with particular attention on Macarthur Coal, Centennial Coal and FelixResources. The coal industry is more resilient than other resource stocks due tothe continuing demand for heating fuels
Over the past several weeks, the price of coal has soared to record highs. But few analysts think the run is over, and some believe that the price of coal could double in 2008.
Surging global demand and disruptions in supply have resulted in three straight weeks of record high coal prices at Australia’s Newcastle port, a benchmark for Asian demand. Power-station coal prices gained $9.04 per metric ton, or 7.8%, to reach $125.48 for the week ended Feb. 8, according to the globalCOAL NEWC Index.
And the news for coal-users continued to get worse this week.
So-called “spot” prices for the thermal coal used in power generation reached $130 a metric ton this week, boosted by a series of supply disruptions in China and Australia.
The price of coal is up 37% already this year, analysts say. And that’s after coal prices rocketed 73% in 2007, Bloomberg News reported.
AUSTRALIAN producers of coal, the nation’s largest export commodity, have secured a stunning price rise because of supply shortages.
European and Asian steel mills have agreeing a trebling in premium hard coking coal prices to around $US305 a tonne.
The reported settlements come on the back of soaring spot prices after millions of tonnes of production were lost because of severe flooding in Queensland in January and February.
According to ANZ commodity analyst Mark Pervan, the flooding has likely cut the world supply of seaborne coking coal – also known as metallurgical coal – by 4-6 per cent.
There are also reports that Japanese utilities have agreed to a more than doubling in Australian thermal coal prices to $US125 a tonne, up from $US56 a tonne.
Coal is Australia’s biggest commodity export earner, with ABARE Economics predicting sales of 252 million tonnes 116 million tonnes worth $35.5 billion in the 2008 financial year, prior to the latest price hike.
ABARE predicts coking coal producers will sell 136 million tonnes worth $27. 4 billion onto the global market in the 2008 financial year.
Thermal coal prices rose to a record for a fourth week at Australia’s Newcastle port, a benchmark for Asia, as floods cut deliveries in Queensland, adding to supply disruptions in China and South Africa.
Power-station coal prices at the New South Wales port gained $13.68, or 11 percent, to $139.16 a metric ton in the week ended Feb. 15, according to the globalCOAL NEWC Index. The price rose 73 percent in 2007. The increase comes as mine owners and fuel buyers are set to negotiate annual contract prices to take effect April 1.
Xstrata Plc, the world’s biggest exporter of thermal coal, last week advised customers of delays to deliveries from two mines in Queensland, including the Newlands mine that produces the type of the fuel burned in power plants. China, with coal deliveries disrupted by the heaviest snowstorms in 50 years, has halted exports until April, while power cuts in South Africa have reduced mine production.
Coal companies in australia
Anglo Coal Australiat Pty Ltd
Bloomfield Collieries Pty Ltd
BM Alliance Coal Operations Pty Ltd
Centennial Coal Company Ltd
Coalpac Pty Ltd
Cornwall Coal Company
CVRD Australia Pty Ltd
Donaldson Coal Pty Ltd
Enhance Place Pty Ltd
Ensham Resources Pty Ltd
Felix Resources Limited
Foxleigh Joint Venture
Gloucester Coal Ltd
Hunter Valley Energy Coal
Idemitsu Australia Resources Pty Ltd
Illawarra Coal Holdings Pty Ltd
Jellinbah Resources Pty Ltd
Lithgow Coal Company Pty Ltd
Macarthur Coal Limited
New Hope Corporation Ltd
Peabody Pacific Pty Ltd
Rio Tinto Coal Australia Pty Ltd
Wesfarmers Resources Ltd
Whitehaven Coal Mining Pty Ltd
Xstrata Coal Pty Ltd
Coal supplies 40% of the planet’s energy needs. Japan – one of the world’s largest importers – has been burning through its reserves since an earthquake damaged a key nuclear power station. India has been shipping in more coal, as well, despite already large domestic reserves.
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India picked up its coal production by a third over the past decade and half, according to the BP Statistical Review of World Energy, but its consumption has also jumped by a hefty 40% during that period. India counts on coal for nearly 70% of its total energy supply
“It’s clearly a supply issue, it’s just one problem after another,” said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “It still looks as if we’ve got some heavy wet weather coming through Queensland and I think the market is going to remain very tight until the whole thing passes.”
The soaring price of coal comes as coal suppliers and coal consumers enter into negotiations on annual contract prices set to go into effect April 1.
Citigroup Inc. (C), UBS AG (UBS), Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM), have all raised their forecasts for thermal coal contract prices for the 12 months beginning April 1. Both Citi and UBS think the contract price will double to $100 a ton. JPMorgan thinks the price settled upon will be closer to $90 a ton.
Goldman Sachs raised its contract price forecast for thermal coal to $110 a metric ton, which would be a 98% increase from last year’s agreed-upon price of $55.65 and a 22% jump from its earlier prediction of $90.
Both Citi and Goldman have predicted that “coking coal” – the coal used to make steel – will also double, reaching $200 a metric ton this year, up 104% from the contract price of $98 that’s been in effect over the past year.