News

May 18, 2009

Coal Set To Go Through US$100/tonne

By Sally White

A strong recovery in coal prices is being forecast, with London equity broker Evolution seeing an imminent end to the current glut. The seasonal winter rise in global coal demand for power generation, it says, should absorb the current supply glut and boost prices.

News in international coal markets included figures of Chinese first quarter purchases from Australia of 3.67 million tonnes of coking coal, up from just 72,000 tonnes in the previous quarter and up from 353,000 in the corresponding quarter a year earlier. "China's demand for hard coking coal has stemmed the decline in Australian exports and saved producers from another round of production cuts," Macquarie analyst Jim Lennon said. Thousands of jobs have been lost in Queensland's coking coal mines as BHP Billiton, by far the world's biggest coking coal exporter, Xstrata and Rio Tinto cut output on slackening demand.

Coal prices have fallen from a record high of  US$200 a tonne cif Europe last September to around  US$60. Demand for coal in Asia is a major support factor for coal prices and China and India are expected to continue to drive demand growth in Asia. Europe is also expected to see a more balanced market from the third quarter of  this year, says Evolution.  Shares in UK Coal climbed 3.9 per cent to 141p as Evolution Securities repeated its “buy” rating and raised its target...