Benchmark Australian spot thermal coal prices rose above $54 a tonne, the highest level in more than three weeks, as active Asian buying was compounded by a lack of spot coal supplies.

Thermal coal, used for power generation, rose $1.37 from a week earlier to $54.66 per tonne, the globalCOAL NEWC index showed on Monday, based on free-on-board (FOB) prices loaded at Newcastle, the world’s largest coal export terminal.

Traders said spot prices have been largely driven up by Asian utilities, such as Japan’s Electric Power Development Co. (J-Power) and Korea Southern Power Co (KOSPO), as they turn to Australia to make up for supply shortfalls after some Indonesian producers declared force majeures on Asian shipments.

“They are all out in the market scrambling to get coal, that’s why prices are going up,” said a trader based in Australia.

“Indonesia is largely sold out of spot supplies for the rest of the year so they can’t get coal there and Australian producers are asking higher prices since there’s such strong demand for Newcastle coal.”

Availability of spot coal supplies in Australia has also been hit after Newcastle port’s opertor told all producers, including Coal & Allied and Xstrata Coal , to cut shipping allocations by about 20 percent for 2007, in a bid to ease congestion at the port.

Another trading source said he has offered spot Newcastle coal shipments with globalCOAL specifications to an Asian customer at $59 a tonne, but other traders said the price was too high and only a distressed buyer was likely to buy at such levels.

According to data from globalCOAL, a July-loading 15,000 tonne shipment was sold at $54 a tonne last week.

“Most sellers are only willing to sell at about $55. Even $55.50 is not an unreasonable price to ask,” said a third trader.

Industry sources said future coal prices for 2008 — which have risen to about $55 a tonne for delivery from an average of $53 earlier this month based on globalCOAL swap prices — would touch $60 in coming months as China soaks up more supplies.

Government sources told Reuters on Thursday that China will remove import taxes on coal by as early as June 1, as part of a bid to slow its export boom and ease its huge trade surplus [ID:nPEK330783].

The competition will also be heightened by growing Indian and Southeast Asian demand, industry sources said.

The stiff competition and tight supply would likely result in Pacific buyers buying South African coal this year, despite higher freight rates and longer distances, an executive from Japanese utility JPower has said.