Newcastle Coal Price Declines for Ninth Week After Oil Slumps

By Jesse Riseborough

Oct. 20 (Bloomberg) -- Power station coal prices at Australia's Newcastle port, a benchmark for Asia, fell for a ninth week, dropping to a 9-month low, amid declining freight rates and as falling oil prices reduced demand for the fuel.

The weekly index for power-station coal prices at the New South Wales port fell $7.20, or 6.4 percent, to $104.70 a metric ton in the week ended Oct. 17, according to the globalCOAL NEWC Index. Crude oil dropped 7.5 percent last week and has slumped 24 percent in the past three weeks.

The Baltic Dry Index, a measure of shipping costs for commodities, fell for a 10th consecutive trading session in London on Oct. 17, indicating a slump in demand. OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends prices lower.

``It is taking its lead from the oil market and Baltic freight rates, both of those are flagging lower prices,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. An OPEC decision to cut oil production may ``trigger a mild relief rally in oil which could flow on to the coal market.''

Newcastle coal traded below the $125 a ton contract price for a third week and is 46 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.

``The risk is still on the downside and sentiment is very much focusing around demand at the moment, not supply,'' ANZ's Pervan said.

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