The firmer contract prices should benefit new producers such as Rio Tinto's Hail Creek mine in Queensland, which is still negotiating long-term deals with Asian steel mills.

The flip side, though, is that export price hikes are being wiped out by the rising Australian-US dollar exchange rate.

In a note from its London-based commodity analysts, Macquarie says that new coking coal demand from Eastern Europe and China is more than offsetting extra supply growth from Australia and Canada.

"On balance a $US4/t plus price rises seems on the cards - for the Australians and Canadians this would still be a year-on-year price cut due to recent currency changes," the broker said.

The coking coal rebound has been caused by rising Chinese steel production. "For the year as a whole this year's production could reach 220Mt compared with 181Mt in 2002," the broker said.

It said that annual price negotiations for hard coking coal will start soon with the market having turned "very firmly in the seller's favour", following a hefty rise in demand in part from new markets such as Ukraine and China.

The forecast price increase would more than wipe out the average $2/t price cut this year for Australian hard coking coal in Asia.

Macquarie said that the recent commissioning of two new coking coal mines in Australia (Dendrobium (2.6Mtpa) and Hail Creek (5.5Mtpa), plus the likely ending of production problems in Australia (Oakey Creek) and Canada would seem to be negative factors for the market.

"However, an expected recovery in global steel production next year, ongoing coal mine closures in the US, expected contractions of Chinese exports of coal and coke and the likely strong growth in imports from China and Eastern Europe (Ukraine and Russia) are significant offsetting factors," it said.

Meanwhile, the thermal market is also showing signs of life, with spot prices of Australian thermal coal into Asia reaching rising to US$30 per tonne.

According to Japan's Tex Report, that level is more than US$2 higher than 2003 Japanese contract prices of US$27.50-US$27.75/t.

Tex said it was "extraordinary" that spot Australian export prices had exceeded long-term contract values, a situation not seen in a decade.

The authoritative newsletter, seen as a mouthpiece for Japanese steel mills, attributed the increase partly to the decline of Chinese export capacity, due to rapidly rising domestic demand.

Though dampened by currency impacts, the rising prices should boost sentiment for local coal diggers such as Austral Coal and Centennial Coal.

Austral, in particular, has been sought after by investors in recent times.

The group's shares have risen by more than 60% since July to hit a peak of 77 cents in late October.

Austral's shares were down 1 cent, or 1.3%, Monday at 73 cents.

Centennial's shares have also enjoyed a decent run, rising 15% since July. But they were off 1 cent Monday at $2.48. MiningNews.net