South African, Australian Coal Rise to Records on Supply Curbs

Coal jumped to records at South Africa's Richards Bay and Australia's Newcastle port as production was curbed by power cuts and flooding, while snowstorms disrupted mining and transportation in China.

Coal at Richards Bay rose $12.20, or 12 percent, to $111.30 a metric ton, according to McCloskey Group Ltd. figures. That's the biggest-ever weekly rise for the data on Bloomberg that go back to 2000. Prices at Newcastle climbed $23.09, or 25 percent, to $116.44 a ton in the week ended Feb. 1, according to the globalCOAL NEWC Index.

``It is another indicator of tightness'' in supply of the fuel, Andrew Wells, an assistant editor at the Petersfield, England-based McCloskey, said by phone today.

The rising prices helped drive up coal producers' shares.

Centennial Coal Co., Australia's second-largest coal company by sales, gained 2.7 percent in Sydney trading and Gloucester Coal advanced 2.5 percent. China Shenhua Energy Co., the world's second-largest coal company, climbed as much as 5.5 percent in Hong Kong trading. U.K. Coal Plc rose as much as 2.2 percent in London.

Power shortages in South Africa forced Anglo American Plc to close mines last month.

Eskom Holdings Ltd., the nation's state-run power utility, is unable to meet demand after the government delayed a decision to expand generating capacity. Today it began cutting 1,500 megawatts of electricity to towns and cities.

Supply Needed

Eskom needs 5.4 million metric tons of additional coal in the next three months to restore stockpiles to 20 days of consumption.

In Australia, BHP Billiton Mitsubishi Alliance is among mining companies that say they may miss deliveries after heavier-than-usual rain flooded pits in the world's biggest coal-exporting country.

Melbourne-based BHP Billiton Ltd., the world's biggest miner, said operations at its alliance with Mitsubishi Corp. may be affected for as long as six months.

The disruptions, in Queensland, are mostly affecting the now ``unbelievably tight'' metallurgical coal market, pushing up spot prices to about $200 or $210 a ton, Graham Wailes, a coal analyst at AME Mineral Economics Pty, said in Sydney.

The worst snowstorms in 50 years in China, the world's largest producer and consumer of coal, prompted the country to halt exports until April.

China Snows

More than three weeks of snow in central and southern China have brought transport networks to a standstill, killed at least 60 people and caused economic losses of at least 53.8 billion yuan ($7.5 billion). The country, reliant on coal for 78 percent of its power, is restricting exports to boost domestic supplies.

Indonesia may be unable to increase production of thermal coal sufficiently to compensate for shortages of supply elsewhere in Asia, as it has in the past, Wailes said.

``I just don't think the supply solution is readily available and that's probably why you've had these huge increases,'' he said.

GlobalCOAL's monthly index for Newcastle thermal coal prices rose $1.71, or 1.9 percent, to $90.87 a ton in January, the fourth successive monthly record. Newcastle is the world's biggest coal-export harbor.

The increase will influence negotiations scheduled to begin between suppliers and buyers on contract coal prices.

JPMorgan, UBS

UBS AG, Europe's biggest bank by assets, on Feb. 1 raised its forecasts for thermal coal contract prices for 2008 and 2009, citing the coal ``crisis'' in China and disruptions in Australia. Prices may reach $100 a ton this year and $125 in 2009, from previous estimates of $90 and $110, the bank said.

JPMorgan on Jan. 29 said it raised its estimate for 2008 contract prices for power-station coal to $90 a ton, from $70.

It boosted forecasts of 2008 prices for coal used in steelmaking to $140 a ton, from $120. Those for thermal coal are $55.65 a ton for the year that started April 1, while coking coal contract prices are $98.38, JPMorgan said.

In Europe, thermal coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement in the fourth quarter advanced $1, or 0.1 percent, to $126.50 a ton as of 4:37 p.m. in London, ICAP prices showed.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

To contact the editor responsible for this story: Reinie Booysen at rbooysen@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.