Newcastle Coal Drops Below $100 a Ton Amid Oil Slump

By Jesse Riseborough

Oct. 27 (Bloomberg) -- Power-station coal prices at Australia's Newcastle port, a benchmark for Asia, fell below $100 a ton for the first time in nine months as a slump in oil prices and freight rates curbed demand for the fuel.

The weekly index for thermal coal prices at the New South Wales port dropped $8.70, or 8.3 percent, to $96 a metric ton in the week ended Oct. 24, according to the globalCOAL NEWC Index. The index was last below $100 a ton in the week ended Jan. 25 at $93.35 a ton.

Crude oil prices declined for a fourth week last week, diving 11 percent as the financial crisis spread, job cuts increased and fuel consumption slowed. The Baltic Dry Index, a measure of shipping costs for commodities, fell for a 15th consecutive trading session in London on Oct. 24, indicating a slump in demand.

Newcastle coal traded below the $125 a ton contract price for a fourth week and is 51 percent off a record $194.79 set for the week ended July 4. The monthly index fell 10 percent to $144.82 a ton in September from $160.90 the previous month.

Citigroup Inc. cut its forecast for the 2009 contract price for the year starting April 1, by 38 percent to $100 a ton from $160 a ton, according to a report today. Merrill Lynch & Co. cut its forecast 24 percent to $130 a ton, from $170 a ton, according to an Oct. 25 report.

Shipments from Newcastle, the world's biggest export harbor for the fuel, fell 6.4 percent in the week ended 7 a.m. local time today, dropping to 1.6 million tons from 1.7 million tons a week earlier, Newcastle Port Corp. said today on its Web site. A total of 29 ships, waiting to load 2.5 million tons of coal, were lined up outside the port, up from 25 vessels last week.

Coal ships waited 8.6 days to load coal in the week, down from 8.8 days a week earlier, Newcastle Port said. The waiting time compared with 0.65 day for general cargo vessels last week, it said.

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