Record coal prices reflect the accelerating boom in Asian coal-fired power generation, which is causing a fundamental and long-term shift in international coal flows. A series of short-term supply disruptions has exacerbated this, highlighting a market with substantial supply infrastructure constraints.

ANALYSIS
Just as record coal prices for steam coal appeared to abate in January, and dry bulk freight rates had fallen from their highs of last November, a series of events in February coincided to send coal prices skyward again:

• Mid-February deliveries into northern Europe were quoted above 150 dollars per metric tonne (mt).
• From Australia’s Newcastle port, prices reached a similar level, but on a free-on-board basis.

The price rise has caused producers to increase their expectations for fixing term contracts, but in effect has stymied negotiations as sellers refuse to lock in at what they see as inflated levels.

Driving factors. Three main events have driven prices:

1. Australia.

Australian loadings suffered throughout 2007 from overlong queues at major loading ports, an important factor behind rising dry bulk freight rates. These queues had been lowered substantially by the start of 2008 — only for bad weather to move in:

• Heavy rains hit supplies in January, and then again in February.
• Queensland floods caused force majeure to be declared on February 14 at Xstrata’s Newlands and Collinsland mines, while stormy weather prevented loading from the Dalrymple Bay Coal Terminal.
• Minor disruptions occurred at other mines, with force majeure also declared at Rio Tinto’s Hail Creek mine, which produces metallurgical coal.

Get More This Analysis In : Coal shifts to Asia

Find More Other News : Coal, Company, Exploration, Mine Trade & Market, Mining Investment, Mining Top News