Newcastle Power-Station Coal Prices Little Changed

By Jesse Riseborough

Sept. 8 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, were little changed last week amid a forecast prices may rise on increased demand and rising costs for competing energy sources.

Power-station coal prices at the New South Wales port were at $161.35 a metric ton, down 54 cents, or 0.3 percent, in the week ended Sept. 5, according to the globalCOAL NEWC Index. Exports in the week ended 7 a.m. local time today fell 23 percent to 1.61 million metric tons from 1.98 million tons a week earlier, Newcastle Port Corp. said on its Web site.

Prices at the port, the world's biggest coal-export harbor, have surged this year as supply constraints and rising Asian demand boost prices. This year's contract price, which rose 125 percent to a record $125 a ton, may increase 36 percent to $170 a ton next year, Merrill Lynch & Co. said in a Sept. 5 report.

``Thermal coal is by far the cheapest source of energy for power generation despite the dramatic price increase over the last year,'' Merrill analysts, led by Sydney-based Vicky Binns, said in the report. ``We retain our bullish thermal coal view, underpinned by supply-side issues.''

Xstrata Plc, the world's largest exporter of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle.

The weekly globalCOAL index has gained 80 percent this year. The monthly index fell 13 percent to $160.90 a ton in August from $184.51 a month earlier. The index traded between $161.35 and $163.90 since Aug. 15 after reaching an all-time high of $194.79 a ton on July 4.

Coal Ships

A total of 19 ships, waiting to load 1.9 million tons of coal, were lined up outside the port, up from 18 ships last week, Newcastle Port said today. Coal ships waited 8.75 days to load in the week, down from 11.78 days a week earlier, it said. The waiting time compared with 0.72 day for general cargo vessels.

A 10 percent increase in coal exports from China last month and cuts to export licenses in the country, the world's largest consumer of the fuel, will push prices higher, Merrill's Binns said. Cuts to exports in Vietnam and Indonesia as well as rail and port constraints in South Africa will curb global supply growth, the report said.

The price of crude oil, up 13 percent this year, reached a record in July as the falling dollar encouraged investors to buy commodities as a hedge against inflation.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net