Asian coal firms targeting Europe

Asian coal firms targeting Europe

LONDON (Reuters): European electricity generators are being
increasingly targeted as a market for Indonesian and Chinese coal
exports as the cost of transporting it half way round the world
slides to two-year lows.

"We're seeing a lot of Chinese coal offered into Europe, more
and more Indonesian coal and some Australian is creeping in,"
coal analyst John Howland of the McCloskey Coal report told
Reuters on Wednesday.

The door has been opened by plummeting freight costs for the
giant Capesize ships that work the coal and iron ore trades, and
brokers said it could remain open for much of this year.

"The negative trend for Capesize rates will continue for most
of this year," said a London ship broker. "We're not seeing high
volumes of coal from Asia yet, but we could see more in the
future," he added.

An analyst from London shipbroker SSY said the cost of
transporting coal between Newcastle in Australia and Rotterdam
had fallen from a peak of $18.50 per ton in the first week of
November 2000 to $8.75 per ton this week.

The cheap freight environment could help Asian producers
expand their markets.

"At the moment it looks as if China will be putting out at
least an extra 15 million tons of steam coal this year, and we
think it's looking at markets further afield than Asia," said
Howland.

Brokers said that more than half of Europe's total coal
requirements - including metallurgical coal - of about 200
million tons a year were imported from abroad.

McCloskey's Howland said that Finland's largest thermal coal
importer, PVO, took a Chinese cargo last month, while there were
rumors in the market that two German power stations had also
bought Chinese cargoes.

Denmark's Energie 2 recently bought a Capesize shipment from
China, as did EdF Trading.

Brokers said that although Europe's traditional supplies from
South Africa and Colombia had also become more competitive in the
new cheap freight environment, the effect was proportionally
higher on trades from Asia that had a longer sea leg.

London shipbroker SSY said that Capesize freight had not been
so low since the end of the Asia crisis.

"Rates continued to plunge last week... Pacific round voyage
rates have halved since the end of June, to sit at their lowest
levels since the first half of 1999," it said in a market report.

Brokers said the freight market weakness stemmed from falling
demand for ships in Asia, coinciding with the delivery of an
armada of newly constructed ships from Asian shipyards.

Shipbuilding analyst David Holder of LR-Fairplay told Reuters
that 22 new ships had been delivered so far this year and 16 more
were due, equating to nearly seven percent of the existing world
fleet.

"That's a fair lump this year, and there are already 52
provisionally booked for construction from 2002 onwards," he
said.

Other brokers talked of negative demand factors for Capesize
ships, including a slowdown in Chinese iron ore imports this
month. "We've got no proof of that at the moment, but next month
the steel production figures should be down," he said.

The average Capesize ship is almost the size of the Empire
State Building and is too large to use the Panama Canal so
instead must pass around its namesake, Cape Horn.