This contrasts with a report released today by ANZ, which suggests coal may be peaking, with mixed results from Australian companies and the on-going impact of coal chain delays and weather conditions slowing production. Even so, ANZ commodity strategists said the price of Australian coal could be set to double due to tightening world supply.

Last week, Citigroup analysts gave overall contract price predictions of $US100 per tonne for thermal coal, and $US200 per tonne for coking coal.

Despite port and rail constraints expected to impact coal production until 2010, and severe weather conditions in Queensland and New South Wales, Citigroup has upgraded recommendations for all of the coal stocks under its coverage to "buy".

Macarthur Coal was predicted to come out on top, with a target price of $A14.40 per share. While Citigroup predicted that Macarthur will overcome infrastructure constraints in Queensland, largely due to the positive impact of higher metallurgical coal prices, it said a number of factors meant Macarthur could have difficulty reaching the target.

"The Coppabella mine that accounts for more than 70% of earnings has experienced pit wall instability, plus it becomes inoperable in wet weather. Currently sales are being constrained by port and rail congestion that should be cleared late in financial year 2008 ... if the impact on the company from any of these factors proves to be greater than we anticipate, the stock will have difficulty achieving our financial and price targets."

Felix Resources is expected to show strong results in 2008, with a target price of $A11.10 per share, however Citigroup said the company is still a risk due to an on-going court case with Xstrata over its Moolarben project. So far construction start-up on the project has been delayed by six months.

Centennial Coal has underperformed for the past two years, however, Citigroup said it would give the company the benefit of the doubt. Citigroup analysts said Centennial's recent financial restructure enabled the company to repay a significant portion of its debt, positioning it well for an operational and financial turnaround.

Based on increasing coal prices, Citigroup has suggested a target price of $A4.70 per share for Centennial, saying that although the company is primarily a domestic producer (80% of production is for the domestic market), the 20% that is exported has substantially improved earnings.

Gloucester Coal is a company on the move according to Citigroup, with a recent share price jump of more than double, from $A3.15 to $A6.50 per share. Citigroup's target price of $A9.70 per share is a result of those strong results early in the year.

Citigroup also suggested that Gloucester could become the subject of a "corporate Mexican stand-off". Both major shareholders have lifted their stakes over the last four months, with AMCI now controlling 13.6% of shares and Singaporean-based Noble Group holding 19.7%.

"What happens from here only time will tell, however we assume that Noble are interested in adding GCL's output to its own production from the Donaldson and Able Tasman mines in the Hunter Valley, and AMCI's interest could be related to its 16.7% holding in Whitehaven Coal."

Overall Citigroup has predicted a strong year for the Australian coal market, forecasting that strong prices and increased demand in Asia exacerbated by problems in overseas coal markets will help Australian coal companies overcome problems to come out on top.