Thermal coal prices are expected to harden into the second half of this year, on the back of strong demand from Asian economies and a possible resurgence in European requirement.
Supply side constraints are likely to provide additional support, as major producers such as Australia and South Africa are undertaking infrastructure overhauls. These are unlikely to be completed in the next two years.
Coal hungry China will continue to lead Asian demand, with analysts anticipating a substantial increase in the amount being brought into the country, even as the overall import requirement in the region is steadily increasing.
Mr Brian Ricketts coal analyst at Paris based International Energy Agency said that "Global coal prices will continue to be linked to Chinese demand. It could import as much as 170 million tonnes this year. If demand picks up in other regions, it will put pressure on the supply chain."
According to Barclays Capital's estimates, China imported about 82 million tonnes of Thermal coal last year. Japan's coal import outlook remains static: UBS Equity Research indicates its new power capacity is likely to be nuclear driven, rather than coal based. However, demand from other nations such as Korea and Taiwan is expected to grow.
India, the world's fastest growing coal importer, could also bring in an additional 27 million tonnes of the fuel over the next two years, taking the total import figure to about 72 million tonnes in 2011. Moreover, Vietnam, which three years ago was the largest exporter of coal to China, is expected to become a net importer by 2015, putting further pressure on global supply in the medium term.
The increase in Eastern demand has meant that producers such as South Africa, earlier focused on servicing the European markets, are now sending more coal into Asia. South African exports to Pacific based customers, show Barclays Capital Commodities Research figures, doubled in 2009 to 30.18 million tonnes, accounting for 45% of all coal export from the country. In 2008, only 22% of its coal exports went to Asian markets.
With European coal demand expected to recover slowly on the back of an overall economic resurgence and rising gas prices, supply chains could be stretched. The International Energy Agency estimates that about 213 million tonnes of coal was imported by Europe in 2008, a number that dipped in 2009 due to the slowdown and availability of cheap gas.
While spot prices at Australia's Newcastle and South Africa's Richard's Bay ports are expected to move towards USD 100 a tonne and USD 90 a tonne, respectively, the commodity should be cheaper in Europe, with Barclays Capital forecasting API2 at USD 81 a tonne.
Source: Business standard |
