Thermal coal prices may be near peak, say analysts

Oct 22 | Updated: Oct 23 2007, 06:04am hrs
Prices for thermal coal, used in power plants, may be near their peak because record prices will spur new supplies from Colombia to Russia, according to analysts including Xavier Prevost of Wood Mackenzie Consultants Ltd.

Although the demand is there, these high prices will drive other producers of coal to the market, including Colombia and Australia, Prevost, senior analyst in the Wood Mackenzie Johannesburg office, said in an interview at a Coaltrans conference in Rome on Sunday. There might be some Russian coal coming in.

Thermal coal shipped from South Africas Richards Bay, site of the worlds largest export terminal for the fuel, may rise to at most $78 a metric tonne next year, Prevost said.

Annual contracts for thermal coal may climb 26% to $70 a tonne next year, Macquarie Bank Ltd forecast last week. ABN Amro Holding NV predicts prices may gain to $69 a tonne.

Supplies of coal used for power generation have been constrained after Indonesian mines missed shipments because of rainfall and Australian miners were hamstrung by rail and port bottlenecks.

Id rather burn oil than pay $78 for coal, said Amulya Charan, managing director of Tata Power Ltds Tata Power Trading Co unit. Tata pays $20 to $30 a tonne for its coal under long-term contracts, he said.

Shipments from Richards Bay will probably climb to about 68 million tonne this year from about 66 million tonne last year, Prevost said.