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.