Post by
no1coalking on Mar 04, 2008 4:19pm
Coal Supply Shortages:
Supply shortages may raise coal prices 50% in 2008
Email Print Normal font Large font AdvertisementMarch 4, 2008 - 6:51PM
Credit Suisse Group, Switzerland's second-largest bank, increased its price forecasts for coal used in power plants in 2008 by 50% because of supply shortages.
The price of benchmark Australia's Newcastle contract thermal coal is raised to $US120 ($128) a metric ton from a previous estimate of $US80 a ton, Credit Suisse analysts led by Hong Kong- based Trina Chen and Bangkok-based Pawaramon Suvarnatemee said in a report today.
Power-station coal for immediate delivery at Newcastle, a benchmark for Japan, South Korea and Taiwan, last week traded at $US132.05 a ton, near a record, according to the globalCOAL NEWC Index, as rains cut deliveries in Queensland and added to supply disruptions in China.
Xstrata Plc, Rio Tinto Group and other miners are struggling to meet increasing demand due to bottlenecks in port and rail networks in Australia's east.
Infrastructure ``constraints remain the major supply discipline on coal,'' the analysts said in the report. ``We expect the supply deficit for the seaborne thermal coal market to persist in 2008-2010.''
Credit Suisse also raised its forecasts for thermal coal prices in 2009 and 2010, stating that the Newcastle contract price may average $US100 a ton from a previous estimate of $US77 a ton, the analysts wrote in the report.
The bank boosted its long-term price forecast to $US75 a ton from $US60 a ton because the cost for ``marginal producers'' is at $US70 to $US80 a ton, free-on-board basis.
As traditional supplies from Australia and South Africa fall behind on infrastructure constraints, demand driven by new coal-fired power plants globally will be looking for ``higher- cost exports from the U.S. and Russia, in our opinion,'' the Credit Suisse analysts wrote.
The price for thermal coal may increase to $US130 a ton for the Japanese financial year beginning April 1, UBS AG said yesterday in a report by analysts led by Glyn Lawcock. The previous forecast was $US100 a ton. Estimates for coking coal, used to make steel, were raised 32% to $US225.
Credit Suisse also raised its forecasts for China's benchmark Qinghuangdao coal in the next three years. In 2008, the new price average is $US107 a ton from earlier estimates of $US80 a ton, and from 2009 to 2010, the price forecast is raised to $US101 a ton from $US81 a ton.
Estimates for so-called hard coking coal, used to make steel, was increased 38% this year to $US200 a ton, by 10% to $US160 a ton in 2009, and 12% to $US140 a ton in 2010, the bank analysts said.
Lower coal prices relative to oil will boost market share of the fuel in the global energy market, they wrote.
Rising prices prompted Credit Suisse to revise higher the earnings of seven coal producers that trade on Asian stock exchanges by between 9 and 38%, with ``top picks'' being China Coal Energy Co., PT Indo Tambangraya Megah and Yanzhou Coal Mining Co., the analysts said.
Bloomberg