Tiger joins dragon in coal price push

WHILE the buzz still surrounds China as a major driver for coal prices, it is India that is emerging as a long-term influence on prices as it increases coal imports.
Tiger joins dragon in coal price push Tiger joins dragon in coal price push Tiger joins dragon in coal price push Tiger joins dragon in coal price push Tiger joins dragon in coal price push

 

Angie Tomlinson

While India holds massive coal reserves, a 5.2% increase per annum in coal consumption has surpassed domestic production – leading to a widening import requirement.

National Australia Bank analysts point out that under India’s Eleventh Five-Year Plan, the Government’s power ministry is planning to develop seven “ultra mega” coal-fired power plants by 2012. Five of these plants will be located near port facilities – with the intention to operate on imported coal.

“Typical coal consumption for plants of this size is around 12 to 13 million tonnes a year,” NAB analyst Gerard Burg said in his November Coal Market Outlook.

“The imported fuel plants could increase India’s thermal coal imports by around 70 million tonnes."

China will also remain a key driver with the country expected to hold net importer status for all of 2008.

Indonesia will not be able to fill the demand either – as its export growth continues to be limited by domestic production.

“Indonesia’s State Electricity Company plans to rapidly increase coal-fired generation capacity in response to power shortages and rising oil prices," NAB said.

The bank predicted thermal coal and semi-soft coking coal prices to rise by 40% in the 2008 Japanese financial year. Hard coking coal prices are also forecast to rise by around 33% to $US130/t.

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