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Met coal producers gearing up for 'golden age'

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https://www.theaustralian.com.au/business/mining-energy/met-coal-producers-gearing-up-for-golden-age/story-e6frg9e6-1225881232496
Met coal producers gearing up for 'golden age'
Diana Kinch
From:Dow Jones Newswires
June 18, 20109:31AM
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Coal being sorted for export. Source: Bloomberg




METALLURGICAL coal producers such as BHP Billiton and Alpha Natural Resources are gearing up for a "golden age", with demand likely to remain high for years to come.


Higher demand for the raw material needed to feed steel industry growth in Brazil, India and China, coupled with delays in new supply projects, means prices will remain high for at least the next two years, Michael Dixon, new business development manager of Sydney-based AME Mineral Economics, said at an industry meeting in Rio de Janeiro.
Higher demand will push global export trade in metallurgical, or coking, coal up to 240 million tonnes in 2010, from last year’s 220 million tonnes, Mr Dixon said.
Annual average prices will rise to $US215 a tonne this year from $US129 in 2009 and are set to grow further to about $US225 in 2011, according to the consultant.
“Prices won’t fall,” Mr Dixon said. Still, they may not regain their historic peak of $US300 a tonne in 2008, during the commodities boom, when there were supply problems including rains in Queensland, he said.


“There’s a considerable scarcity of high quality coking coal throughout the globe. There are infrastructure constraints to new projects, especially in Australia. And China, India and Brazil will import a lot more, stressing supplies,” he said.
Australia, the world’s biggest supplier of metallurgical coal, is expected to export 140 million tonnes of the raw material in 2010. Plans to boost exports by a further 80 million tonnes a year may not fully materialise due to delays in port expansion, Mr Dixon said.
The new resources super profits tax being discussed by the Australian government and which would impose a hefty new tax burden on profitable mining companies, may also hinder the emergence of new coal mine projects, he said.
“Since the tax started to be discussed earlier this year, mining projects worth $20 billion have been put on hold,” Mr Dixon said.
Arun Kumar Jagatramka, chairman and managing director of Indian producer Gujarat NRE Coke, said it will be difficult for other suppliers to meet the gap caused by China recently pulling out of the metallurgical coal export market in a move to meet its own growing demand.
“China used to export up to 10 million tonnes a year and now it has become a net importer,” Mr Jagatramka said. “Last year, India had a coke shortage of 5 million tonnes and there’s a global supply shortfall of 12 million tonnes.”
India may need to import an extra 19 million tonnes of the raw material by 2011 and Brazil will need a further 14 million tonnes of supplies in coming years to meet its planned steelmaking expansions, Mr Jagatramka said.


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