Australian coal mine producers, the world’s largest mining exporters of the fuel, are switching output to semi-soft coal from thermal coal to take advantage of higher prices, reducing supply of power station coal, Mark Pervan, a senior commodity strategist with Australia and New Zealand Banking Group Ltd. in Melbourne, said today by phone.

Thermal coal mine prices at Australia’s Newcastle port, a benchmark for Asia, rose 13 percent to a record for a sixth week amid reduced supplies of the fuel.

The weekly index for power-station coal mine prices at the port in New South Wales state gained $22.69 to $194.79 a metric ton in the week ended July 4, according to the globalCOAL NEWC Index. The volume coal mine shipped in the week ended 7 a.m. local time today fell 17 percent to 1.7 million metric tons from 2.06 million tons a week earlier, Newcastle Port Corp. said today on its Web site.

“That is tightening the thermal coal market; you are basically taking thermal coal mine supplies out of the market,” Pervan said. “That is an additional squeeze on the market so it is no surprise we are seeing these higher prices.”

The weekly globalCOAL index is up 46 percent since the start of May. The monthly index gained 18 percent to $163.68 a ton in June, from $138.31 the previous month.

Xstrata Plc, the world’s largest exporter of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal mine through Newcastle. Bottlenecks at Newcastle, together with flooding in Queensland state to the north, helped drive prices for power-station coal from the Australian port to a record this year.

Price Incentive

Thermal coal mine producers won a 125 percent increase to $125 a ton in annual contract prices for the year that started April 1. Contract prices for semi-soft coal are likely to be settled for about $240 a ton, Pervan said.

“There is still plenty of incentive to move in to a market where it is twice the price,” he said.

Thermal coal prices will remain at record levels into next year as power stations demand more of the fuel and railroad and port bottlenecks in Australia and South Africa limit supply, Preston Chiaro, the head of Rio Tinto Group’s energy unit, said June 6.

“We have seen the bulk of the gains; we are now at a point where it is going to struggle to push much higher,” ANZ’s Pervan said of the current Newcastle spot price. “I think $194 a ton is getting pretty close to the upper limits.”

Ship Queue

A total of 41 ships, waiting to load 3.4 million tons of coal, were lined up outside the port, up from 38 a week earlier, Newcastle Port said today. Coal ships waited 12.93 days to load coal in the week ended July 7, up from 11.15 days a week earlier, Newcastle Port said.

A total of 28 vessels carrying coal left Newcastle in the week ended July 7, Newcastle Port said today in an e-mailed report. Seventeen ships were bound for Japan, three for South Korea and one for Malaysia, it said.

Exports of thermal coal from China are down 9.5 percent so far this year, Macquarie Group Ltd. said in a report today, citing Chinese customs data. Exports through to May were 14.5 million tons, from 16 million tons in the same period a year earlier, Macquarie said.

“Chinese power stocks are at very low levels,” ANZ’s Pervan said. “There are reports again that China is likely to again significantly reduce exports in the second half of this year and is again underpinning strong sentiment in the Newcastle market.”

source news : bloomberg.com

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