Contract prices for coal to fall: Report

Coal prices under annual supply contracts starting in April might fall as much as 17 percent, the first drop in three years, because of increased supplies from Australia, Indonesia and China, Credit Suisse First Boston said as quoted by agency.

Prices of thermal coal used in power plants may fall to US$45 a metric ton from $54 a ton next year and coking coal used for making steel may fall 12 percent to $110 a ton, CSFB analysts Peter O'Connor and Alex Mirkovic said Monday in a report.

"Both key exporters Indonesia and Australia have delivered solid production," of thermal coal throughout the year, O'Connor and Mirkovic said in the report.

Thermal coal prices reached a record this year on higher demand from Chinese power plants while prices of coking coal more than doubled on increased global steel production, led by China. Prices of thermal coal for immediate delivery are trading at $40 a ton, a quarter below contract prices.

South African thermal coal prices have fallen to their lowest in almost 23 months as supplies from the nation and other exporters such as Indonesia and Colombia increased.

Coal delivered within three months from Richards Bay dropped 46 cents, or 1.1 percent, to $40 a metric ton last week, the global COAL RB Index showed, the lowest since the week ending Dec. 6, 2003. The index is 32 percent lower than a year ago. (*)