UBS Sees ‘Mad Dash’ for Coal as Energy, Steel Demand Gains

A “mad dash” for coal assets will drive deals as steelmakers, producers and utilities seek to secure supplies because of rising demand from Asia, UBS AG said.

Australian companies that may be “in play” include Whitehaven Coal Ltd., and Riversdale Mining Ltd., UBS analyst Glyn Lawcock told reporters in Sydney today. “I call it the mad dash for assets,” he said.

There have been $6.7 billion worth of coal acquisitions announced this year in Australia, the world’s biggest exporter of the commodity, exceeding the $5.9 billion for the whole of last year, according to data compiled by Bloomberg. China last year imported a record amount of coking coal, used for steelmaking, and India almost doubled purchases of energy coal for its power stations.

“Steel producers are trying to keep players independent” by taking stakes in them, Lawcock said. “Coal producers are trying to increase their exposure.”

Banpu Plc, Thailand’s biggest coal producer, in July agreed to buy the shares in Centennial Coal Co. it doesn’t already own for A$2 billion ($1.8 billion). Anglo American Plc last week said it’s seeking an acquisition that may more than double output to meet rising demand from India and China.

“If you listen to Banpu, it believes the only way the Asian region will keep pace with the energy demand over the next five years is coal,” Lawcock said. “It’s not the cleanest, preferred form on a 10-to-20 year view, but for the next five years, you’re not going to get a nuclear plant built as quickly as a coal plant.”

Banpu is likely to buy more coal assets, Lawcock said.

Indian Demand

Indian thermal coal imports jumped to about 60 million metric tons last year from about 30 million tons in 2008, Macquarie Group Ltd. said in a report in March.

Demand for coking coal is forecast to rise 14 percent to 257 million tons in 2010, and 6 percent next year, driven by China and India, UBS analyst Tom Price said on July 22.

Mergers and acquisitions in the gold industry will also continue, UBS analyst Jo Battershill said at the same conference.

“Real money in the gold space is going to be made in the next year or 18 months in these smaller 100,000 ounce to 200,000 ounce projects in West Africa,” Battershill said.

Global gold mining takeovers are at a record this year as producers are discovering less metal while the bullion price has advanced each year since 2001.

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