Coal & Allied Says New Capacity to Curb Spot Prices Next Year
Coal & Allied Says New Capacity to Curb Spot Prices Next Year
Tan Hwee Ann
Bloomberg
Coal & Allied Industries Ltd., an Australian coal miner
controlled by Rio Tinto Group, said Asian spot prices for the
fuel used by power plants will decline in 2005 because of new
capacity in Indonesia and Australia.
The price of thermal coal, burned to produce electricity, will
probably be lower than US$55 a metric ton on average in 2005,
Coal & Allied Chairman Brian Horwood said in Melbourne. The spot
price of thermal coal shipped from Australia's Newcastle port,
the world's biggest coal-export terminal, was $55 in September,
Sydney-based consultancy Energy Economics Pty. said.
Australian coal prices, a benchmark in Asia, reached a record
this year as China limited exports to ensure supplies for
domestic users. Indonesia's PT Bumi Resources has said it plans
to boost output 13 percent next year, while Australian rivals
such as Centennial Coal Co. are also trying to increase exports
to take advantage of the higher prices.
"Coal prices will stay strong, but not at the current level,"
said Horwood in an interview. "We see some easing because of
expansion in Indonesia and Australia. There will be extra
capacity next year."
Australia is the world's biggest coal exporter. Indonesia is
the world's second-largest shipper of thermal coal. Average spot
prices from Newcastle have fallen 11 percent since June,
according to Energy Economics.
"There's a recognition that the spot prices we're seeing this
year are a one-off," said Clyde Henderson, director of Energy
Economics. "One of the factors in the market is simply that these
prices will attract capacity expansion."
While spot prices are declining, long-term contract prices for
the year beginning April 1, 2005, may rise 11 percent to $50 a
ton, from $45, Henderson said.
Thermal coal accounted for 82 percent, or 22.4 million tons,
of Coal & Allied's production in 2003. The company owns stakes in
mines in the Hunter Valley of Australia's New South Wales state,
including Bengalla, Warkworth and Mt. Thorley Operations.
The company has "the potential" to increase capacity once
there's more rail and port capacity available, said Horwood,
without giving more details.
The lack of rail capacity and port congestion has limited
Australia's exports this year, prompting Newcastle Port Corp. to
introduce a quota system in April.
Coal & Allied has said second-half profit will rise because of
higher contract prices for coal. It posted net income of A$7.2
million ($5.3 million) in the six months ended June 30, little
changed from a year earlier.
Shares of Coal & Allied were unchanged at A$29.50 at 10:02
a.m. Sydney time. The stock has gained 30.5 percent this year,
compared with the 12.6 percent gain for the benchmark S&P/ASX 200
Index.