Coal prices to stay firm

Coal prices will stay little changed in the second half of the year as exports from Australia and Indonesia rise in line with an increase in global demand, according to a survey conducted by Bloomberg.

Spot prices for thermal coal loaded at Newcastle, Australia, the world's largest coal export terminal, will average $52 a metric ton in the second half.

Prices in the first-half averaged $51.27 a ton, based on data published by online trading platform globalCOAL.

Coal demand is increasing because of an "energy crisis," Ben Lyons, an analyst at Macquarie Bank Ltd. in Sydney, said in an interview. There is also "additional supply coming out of Indonesia and Australia as we work through infrastructure bottlenecks."

Coal prices have risen to record highs in the past 18 months as the global economy expands and utilities switch to the fuel amid surging oil prices. The gains have spurred the enlargement of ports in Australia, the largest thermal coal-exporting nation, and the expansion of mining operations in Indonesia, the world's second-biggest exporter.

The globalCOAL NEWC Index for coal shipped from Newcastle, Australia, last week declined 7 cents to $51.85 a ton, 11 percent lower than a year earlier. The index reached a record high of $63.63 in the week ended July 3, 2004.

Global thermal coal demand will rise 1.5 percent this year to 5.01 million tons while Production will rise 0.2 percent to 4.58 million tons.

Bottlenecks at Australian ports have led to queues of ships waiting to be loaded with coal and other bulk commodities. Queues outside Newcastle, New South Wales, peaked at 56 in March 2004.

In May, Dalrymple Bay owner Babcock & Brown Infrastructure Ltd. sold A$182.4 million ($137 million) of shares to fund the expansion of what is already Australia's second-largest coal export terminal.

Gladstone in Queensland is also increasing coal-loading capability.

Australian thermal coal exports will rise 3 percent this year to 115.7 million tons, Investec's Hatch estimated in a report last month.

Indonesian miners will export 118 million metric tons of coal this year, 12 percent more than 2004, according to London-based shipbroker Clarkson Plc.

Coal prices have risen to records in Asia because of soaring demand in China.

PT Bumi Resources, Indonesia's largest coal exporter, said in June that output may rise as much as 21 percent a year for the next seven years. Bumi plans to expand mining output at its PT Kaltim Prima unit in East Kalimantan to 30 million tons this year from 24 million tons in 2004.

"Indonesian exports really shot up last year, more than people expected," said Gerard Burg, minerals economist with National Australia Bank in Melbourne. "There are still some impressive things going on there."(*)