Regional Coal: Australian coal boom cools as price cuts loom

Billions of dollars worth of coal from Australia, the world's biggest exporter, faced price cuts of up to 25 percent next year as Asian buyers chopped back stunning 2005/06 price rises, industry experts said as quoted by South Africa's Business Report.

This would dampen, but not kill, a boom for Australian coal, a main raw material for Asian blast furnace steel mills and coal-fired power stations, they said as price negotiations for 2006/07 proceeded in Tokyo.

At McCloskey's Australian Coal Forecasting Conference, convener and analyst Gerard McCloskey forecast contract price cuts of about 24 percent for power-generating thermal coal in the Japanese fiscal year beginning April 1.

Steel making coking coal prices were seen emerging between unchanged rollover prices and cuts of about 16 percent, McCloskey said.

Top broker analyst Peter O'Connor of Credit Suisse First Boston forecast an average price cut of 12 percent for coking coal and of between 7.5 percent and 26 percent for thermal coal.

Sensitivities are running high as talks continue over A$25 billion a year worth of Australian coal, the country's biggest export and a major import for north Asia.

While demand for coal will stay strong in Asia in 2006/07, this will not stop last year's unprecedented price rises of about 120 percent for coking coal and 20 percent for thermal coal being pared back in negotiations with the Japanese steel mills for coking coal, and power stations for thermal coal.

The spot market is down from $41.90 a month ago and $51.15 a year ago.

A South African spot sale at $44 on Friday indicated the market might have bottomed out, McCloskey said.(*)