DJ Another Big Rise For Coal In 09,Mkt Strong For Yrs -Macquarie14/07/2008 12:20PM AEST SYDNEY (Dow Jones)--Macquarie Bank expects another big rise in 2009 coking and thermal coal prices, which have already doubled and tripled this year to record levels on the back of supply constraints and an ongoing strong demand, the bank said in a note released over the weekend.
Contract prices for coking coal, which settled at $300 a metric ton for this year, up three times on 2007, are forecast to reach $350/ton in 2009, up 17% on Macquarie's previous forecast.
Thermal coal, which more than doubled to $125/ton this year, is likely to reach $180/ton, up 29% on the previous forecast, the bank said in the commodity update.
The longer-term picture looks even more bullish because of likely delays in new capacity and a large potential growth in both Chinese and Indian imports, which will keep the markets at high levels "for several years to come," said Macquarie.
The massive rises in contract prices this year came on the back of floods in Australia's Bowen Basin in Queensland, the world's biggest coking coal producing region, as well as bad weather disrupting South African coal exports.
"There are now signs that Chinese steel mills will be facing desperate shortages of metallurgical coal in the coming years and look set to meet previous expectations of strong import growth," said Macquarie.
"However, the delays in new capacity combined with the disastrous floods in Queensland earlier this year, which look set to cost around 10 million tons of lost supply in 2008, appear to have created a structural shortage of metallurgical coal, which could now last for several years," the bank said.
While steel mills have passed on much of the massive price rises in coking coal as well as iron ore, they have stepped up efforts to protect the supply of raw material.
South Korea's Posco recently moved to build a blocking stake in Australia's MacArthur Coal Ltd. (MAC.AU) to protect its offtake agreement and thwart a possible takeover bid by ArcelorMittal SA, the world's biggest steelmaker, after Arcelor increased its stake to 19.9%.
Also, India's Tata Steel Ltd. (500470.BY) last year bought a 35% stake in Australia-listed Riversdale Mining Ltd.'s (RIV.AU) 1.2 billion-ton Mozambique coal project.
In thermal coal, China remains a key unknown and could potentially lead to a much larger price rise going forward. China has, in the past, slapped export bans on thermal coal in an effort to curb rising power prices fanning inflation.
Delays in de-bottlenecking rail and port infrastructure in Australia, the world's biggest supplier of seaborne coal, and delays in Indonesian, Mozambique and Canadian expansion plans are contributing to the ongoing tightness, Macquarie said.
In a recent note, Citigroup said a planned doubling of Australia's total port capacity to 500 million tons by 2013, alongside rail capacity, won't see the full benefit of such a rise feed through.
"Mismatches (in getting coal to ports and onto ships) will cap exports at around 340 million tons," said Citi's managing director of global commodities, Alan Heap.
-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8235-2965; [email protected]
(END) Dow Jones Newswires
July 13, 2008 22:20 ET (02:20 GMT)
AQA Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
