Years of High Coal Prices Predicted
Posted on: Friday, 9 May 2008, 15:00 CDT
By STEEMAN, Marta
INVESTMENT bank Macquarie expects a shortage of coal for steelmaking to last several years.
In a research report Macquarie says hard coking coal prices have risen to an average of US$285-US$300 (NZ$364- NZ$384) a tonne for Australian and Canadian producers who recently settled deals with Japanese steel mills. That is a tripling of price from 2007's US$96- US$98 a tonne.
New Zealand's new listed coal company Pike River Coal is a beneficiary of tripling international coal prices with its share price climbing in the past month to 143 cents. It issued shares in October at 100c each and shares in a rights issue were sold at 90 cents each in January. Yesterday the Pike shares closed up 6c at 143c.
Pike's underground coal mine high in the Paparoa Range and beneath conservation land 46 kilometres north of Greymouth is expected to start production from July and export 200,000 tonnes in the year to June 2009. It should reach full production the following year.
The Australian prices set the benchmark for other producers. Australia is the world's largest coal exporter.
"There are now signs that Chinese steel mills will be facing desperate shortages of met (metallurgical) coal in the coming years and look set to meet previous expectations of strong import growth," Macquarie says.
"However, the delays in new capacity combined with disastrous floods in Queensland earlier this year (which look set to cost at least 15 million tonnes of lost supply in 2008) appear to have created a structural shortage of met coal that could now last for several years."
Pike chief executive Gordon Ward said yesterday that the company expected close to US$300 a tonne for its premium coking coal and close to US$295 a tonne for hard coking coal.
Negotiations were just starting with some Japanese steel mills. They would be followed by negotiations with Pike's two Indian shareholders who have contracted to buy 55 per cent of the mine's coal.
John Kidd, of brokers McDouall Stuart, which organised the Pike River share issue last year, said analysts were now rejigging price forecasts. Three months ago they were predicting prices of US$75 a tonne in four or five years time, but that prediction had risen to US$125 a tonne.
(c) 2008 Dominion Post. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Dominion Post
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