Uncertainty keeps coal prices high

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

25 Dec 2007

Coal prices are likely to remain strong next year, close to this year's average levels, because there are many supply uncertainties despite the emergence of the United States as a major exporter.Coal prices surged to record highs this year after a shift from historically abundant supply to tightness due to a leap in Chinese demand, which prompted a cut in itsexports. The consensus in the coal market is that next year may see a small dip in prices but, from 2009 to 2015, the trend will be upward. "The general feeling is that the market is going to remain strong," said Jim Lennon, an analyst at Macquarie Bank. Deck Slone, vice-president investor relations and public affairs at US producer Arch Coal said: "Certainly we believe the world market will remain extraordinarily tight into 2008." Coal industry members who recently attended a closed-door industry event in Stockholm concluded that there would be a small surplus of around 10 million tonnes next year, which would cause a price dip in the second half.Global supply would rise by about 35 million tonnes in 2008: 5 million from Australia, 15 million from Indonesia, 4 million from Colombia, 2 million from South Africa and 8 million from the United States, Stockholm delegates said.New Zealand's Pyke River Coal will come into production next year and hopes to export around one million tonnes of hard coking coal for the next 18 years. But producers, traders and consumers said that despite the slightly bearish supply/demand calculations on paper, if just some of the numerous supply problems seen this year were repeated next year, the 10 million surplus could easily swing into deficit. Huge queues at Australia's Newcastle port, lack of Russian rail cars, Russian and South African port problems, doubtful US rail capacity and weather-related shipping problems all combined this year to cutsupply and help to boost prices. "What I don't see is where there is a clear source anywhere of spot coal, in quantity, for 2008," one European utility said. Russian exporters said it would take them until June next year to catch up with delayed shipments due to logistical problems - lack of rail cars and port disruptions. Indonesian producers said shipments would be vulnerable to heavy rains during the next few months. This year late rains in January led to a spate of force majeure declarations. Australian shipments were delayed and restricted throughout the year due to queues at Newcastle port. The reintroduction of quotas for port access is not expected to resolve the problem. Around 20 million tonnes of US coal had been sold for 2008 shipment to Europe, US coal analyst Jim Thompson said.