Australia's Newcastle Coal Price Climbs to Record (Update1)
By Jesse Riseborough
July 7 (Bloomberg) -- Thermal coal prices at Australia's Newcastle port, a benchmark for Asia, rose 13 percent to a record for a sixth week amid reduced supplies of the fuel.
The weekly index for power-station coal prices at the port in New South Wales state gained $22.69 to $194.79 a metric ton in the week ended July 4, according to the globalCOAL NEWC Index. The price has doubled since the start of the year.
Australian producers, the world's largest exporters of the fuel, are switching output to semi-soft coal from thermal coal to take advantage of higher prices, reducing supply of power station coal, Mark Pervan, a senior commodity strategist with Australia and New Zealand Banking Group Ltd. in Melbourne, said today by phone.
``That is tightening the thermal coal market; you are basically taking thermal coal supplies out of the market,'' Pervan said. ``That is an additional squeeze on the market so it is no surprise we are seeing these higher prices.''
The weekly globalCOAL index is up 46 percent since the start of May. The monthly index gained 18 percent to $163.68 a ton in June, from $138.31 the previous month.
Xstrata Plc, the world's largest exporter of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle.
Thermal coal producers won a 125 percent increase to $125 a ton in annual contract prices for the year that started April 1. Contract prices for semi-soft coal are likely to be settled for about $240 a ton, Pervan said. ``There is still plenty of incentive to move in to a market where it is twice the price,'' he said.
Record Prices
Thermal coal prices will remain at record levels into next year as power stations demand more of the fuel and railroad and port bottlenecks in Australia and South Africa limit supply, Preston Chiaro, the head of Rio Tinto Group's energy unit, said June 6.
``We have seen the bulk of the gains; we are now at a point where it is going to struggle to push much higher,'' ANZ's Pervan said of the current Newcastle spot price. ``I think $194 a ton is getting pretty close to the upper limits.''
Exports of thermal coal from China are down 9.5 percent so far this year, Macquarie Group Ltd. said in a report today, citing Chinese customs data. Exports through to May were 14.5 million tons, from 16 million tons in the same period a year earlier, Macquarie said.
``Chinese power stocks are at very low levels,'' ANZ's Pervan said. ``There are reports again that China is likely to again significantly reduce exports in the second half of this year and is again underpinning strong sentiment in the Newcastle market.''
To contact the reporter on this story: Jesse Riseborough in Melbourne at [email protected]
