Regional Coal: Coal prices to drop as supply increases in 2006
Thursday, January 6 2005 - 02:52 AM WIB
Contract prices next year for thermal coal, used in power stations, will average $46 a metric ton versus $53 for 2005, the bank said in an e-mailed report. Prices for 2004 were $40 a ton, Morgan Stanley estimated.
?Settlements in 2005 will represent the top of the price cycle,? Morgan Stanley said. ?We are reaching a turning point in pricing momentum.?
Thermal coal prices surged last year as the global economy grew at its fastest rate in three decades, increasing energy consumption. Demand outpaced production the last two years, Morgan Stanley estimated.
Combined exports from Australia and Indonesia are set to rise 8.7 percent in 2006 to 250 million tons, Morgan Stanley said.
Coal was more attractive than other fuels last year for power-plant operators. In New York during 2004 crude oil futures rose 34 percent while average natural gas prices were 13 percent higher.
Contract coal prices reflect higher spot prices. The globalCOAL NEWC Index of coal delivered within three months from Newcastle, Australia, rose last week $1.10, or 2.1 percent, to $53.48 a ton. That's 33 percent higher than a year earlier. Newcastle is the world's biggest coal-export port.
Morgan Stanley raised its 2006 Japanese fiscal year coking coal price forecast from $110 to $126 a ton. Contract prices for the raw material used to make steel will average $95 in the following year.
?The tight supply environment has arisen due to the continuing ramp-up of Chinese steel capacity,? the bank said.
Shares in Zug, Switzerland-based Xstrata, the world's largest thermal coal exporter, were maintained ?equal-weight? by Morgan Stanley.
U.S. miner Peabody Energy Corp. and Melbourne-based BHP Billiton, the world's biggest mining company, were also maintained ?overweight.? China's Yanzhou Coal Mining Co Ltd. was maintained as ?overweight.? (*)