ABARES tips a strong year for coal producers

DESPITE the impacts from a devastating wet season in Queensland, Australia’s commodities forecaster expects Australian metallurgical coal exports to increase 2.52% to 163 million tonnes in 2011.
ABARES tips a strong year for coal producers ABARES tips a strong year for coal producers ABARES tips a strong year for coal producers ABARES tips a strong year for coal producers ABARES tips a strong year for coal producers

Image courtesy of Xstrata Coal

Blair Price

The Australian Bureau of Agricultural and Resource Economics and Sciences further expects Australian met coal exports to increase by an average of 5% per annum in the following years leading up to 163Mt in 2016, on the back of planned port and rail capacity expansions.

ABARES estimates that 15Mt of Queensland coal exports were lost by the heavy rain between December and March at a cost of $A2-2.5 billion, but noted this was lower than previously anticipated.

About two-thirds of the lost coal exports were estimated to be met coal.

Yet the wet weather over the past months, which includes higher than average rainfall in New South Wales, also triggered some strong price rises for coal commodities.

ABARES said spot price indicators for high quality coking coal were beyond $US300 a tonne in mid-February, while Newcastle thermal coal spot prices reached $135/t in mid-January before slipping to $125/t a month later.

Consequently, ABARES estimated Australia’s metallurgical coal export earnings would increase 39% this financial year to $34 billion, which is underpinned by a forecasted 61% increase in contract prices.

For thermal coal, the wet weather impacts come before annual benchmarks are settled with Japanese power producers and ABARES expects the price to be settled at $125/t for the Japanese financial year starting in April.

This is even stronger than the $98-104/t range settled last year and is in line with the record prices struck in 2008.

Australian thermal coal export earnings are tipped to jump 24% to $15.1 billion for this financial year as a result of higher production and contract prices.

On the demand side of the equation, ABARES is forecasting total world imports of met coal to increase 4% this calendar year to 264Mt and total world thermal coal imports to grow 2.7% to 792Mt.

Chinese and Indian demand is expected to underpin the growth for both thermal and met coal in the next five years, with historically low international freight rates expected to aid Australian exports, especially in 2011 and 2012.