Asian coal prices to rise on local demand, say analysts

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Acute coal shortage to push up import

Jakarta, Mar 27 : Asian coal prices are likely to rise for reasons including strong domestic demand in China and Indonesia as well as Australian port congestion, analysts and industry executives said on Tuesday.

“Far eastern prices will be firm thanks to shortages in China and a continuing increase in demand in India and Korea,” Colin Gubbins, director of consultancy The McCloskey Group (TMG), told the McCloskey Asian coal conference in Jakarta.

Kaz Tanaka, vice president director of PT Arutmin Indonesia, a unit of PT Bumi Resources Tbk, said coal supply to the Asian market had been hampered by queues at Australian ports. “Demand for coal has been fuelled by the growing economies of China and India,” Tanaka said. Benchmark Australian coal spot prices fell to a two-month low this week but Gubbins forecast prices will still pick up.

Demand from China and India will grow by 47.6% and 17% respectively this year, leading to a 6.1% increase in demand in Asia to 325 million tonne in 2007, Gubbins said. He said there was a risk of the Atlantic coal market being oversupplied in 2007 but added that the Asian market was “on fire — only Indonesia can douse the flame of shortage”.

Indonesia’s coal production is seen rising to 370 million tonne in 2025 from 193 million tonne last year, energy ministry data shows.

However, conference delegates said most of Indonesia’s rise in output is likely to be absorbed by domestic consumers — exports are expected to increase only slightly to 150 million tonne in 2009, from 148 million tonne last year, and will stay at the 150 million level until 2025.