AME positive on thermal outlook

AME Mineral Economics have revised upwards its 2005 thermal coal Australia-Japan contract price forecast and suggested in its August outlook producers would have restricted opportunities to take advantage of the lucrative spot market because of limited availability, owing to the Newcastle port allocation system.

Angie Tomlinson

The economic forecaster based its thermal revision on the North Asian thermal coal demand remaining firm, whilst in the Atlantic markets, European import demand will be sustained by declining domestic coal production. AME said US import demand will be boosted by legal challenges to Appalachian mountain-top mining and rail infrastructure constraints.

It said China held the key to Asia-Pacific supply/demand balances.

“The National Coal Association has foreshadowed that 2005 exports will be held in line with this year. Chinese exporters are also facing higher costs through removal of rail and port subsidies and the probable axing of the 11% VAT rebate on thermal coal exports. Together, these will add around US$10/t to cash costs,” AME said.

It noted European supply would be impacted by reduced exports from Poland, down as much as 10Mt on 2003 levels.

Australian producers being able to take advantage of the spot price however, will be limited to the end of the year with the continuation of the Newcastle port allocation system.

“A move back to contracted supply and the experience of 2004, when contract price levels escalated with time, suggests most buyers will wish to settle early to secure tonnage,” AME said.

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