Newcastle coal price dips on low demand

The price of power-station coal at Australia's Newcastle port, the world's largest export-harbour for the fuel, fell for a second week as the end of the northern hemisphere summer reduced demand.

Coal for immediate delivery at Newcastle in New South Wales state declined 2 per cent, or $1.38, to $68.57 a tonne in the week ended August 24, according to the global COAL NEWC Index. Prices reached a record of $72.37 two weeks ago, breaching the previous high of $70.88 in June.

"Prices have drifted a bit lower as we're in a situation where demand has started to slacken and we would expect Indonesian producers have started to come back online," said Gerard Burg, minerals and energy economist at National Bank in Melbourne. "Prices may continue to drift lower until the point when consumers look to restock", ahead of the winter.

Demand for coal used in power generation plants reaches its summer peak in China, Japan and South Korea in July and August as air-conditioning usage rises. Supplies became tight when heavy rain caused some Indonesian producers to declare force majeure and an earthquake in Japan July 16 led to Tokyo Electric Power Co, Asia's biggest power producer, increasing use of generators fired by coal and gas to compensate for output lost after the closure of a nuclear plant.

The curtailing of shipments from Indonesia and increased demand from Japan had added more pressure on Australian supplies, already struggling to overcome bottlenecks at the port and on the rail system in New South Wales. Rio Tinto, BHP Billiton and Xstrata have been unable to increase shipments enough to fulfill orders after China boosted imports and cut exports to meet demand.

About a third of Australia's coal-export capacity is at Newcastle. The nation risks losing as much as A$7.9 billion ($6.56 billion) in export revenue in the next decade if port and rail congestion aren't resolved, according to government forecasts.

The number of ships waiting to load coal at Newcastle fell to 50 as of this morning, from 54 the previous week, Newcastle Port Corp said on its Web Site today. Vessels waited an average of 19.7 days to load coal compared with 19.3 days the earlier week, it said.

It took on average 23 hours to load general cargo, the port said. In the week ended this morning, a total of 1.67 million tonnes of coal was shipped, more than the 1.44 million tonnes a week ago, Newcastle Port said.

Nineteen ships with coal left the port in New South Wales state in the week ended August 25 compared with 15 the previous week, Newcastle Port said in an e-mailed statement. Fifteen departed for Japan, two to Taiwan and one each to the Netherlands and Malaysia, it said.

Banpu ended its force majeure in its Jorong mine in Indonesia's Kalimantan region August 13 and aims to normalise operations next month, Philip Gasteen, head of marketing and logistics at Banpu, said August 13. Jorong mine has an annual capacity of 3.5 million tonnes.

Straits Asia Resources, a Singapore-listed company with coal mines in Indonesia, announced it will miss shipments July 31. It is yet to lift its force majeure.

China's coal imports surged 50 per cent to 30.96 million tonnes in the first seven months while exports fell 21 per cent to 28.86 million tonnes, the customs administration said August 15. Lower exports from China is prompting South Korean power utilities to buy coal from other countries.

Korea Midland Power Co, a unit of South Korea's largest utility, is seeking 360,000 tonnes of thermal coal for delivery in the fourth quarter for its Boryeong power plant, according to tender documents sent out to traders August 23. Korea Southern Power Co wants 300,000 tonnes of thermal coal for October to March 2008 delivery, according to its website.

Spot coal prices were also boosted in June by storms that closed Newcastle port and damaged the rail track network. About 2.5 million tonnes of export capacity was lost because of the disruptions. Rio Tinto, BHP Billiton and Xstrata are among mining companies that ship coal through the port.