Global Coal Supplies to Outpace Demand in 2009 - ABARE

Pressure on the thermal coal market is expected to ease in 2009 as global exports outpace demand, an Australian government forecaster said on Monday.

But coal prices are likely to remain high as infrastructure constraints among key exporting nations continue to keep a lid on supplies, the Australian Bureau of Agricultural and Resource Economics (ABARE) said in its June quarterly bulletin.

Thermal coal exports are forecast at 732.7 million tonnes in 2009, up from a previous estimate of 719.7 million tonnes, ABARE said. Coal imports for 2009 were also revised up to rise 3.7% from a year ago to 730.7 million tonnes in 2009, compared with a previous forecast of 719.8 million tonnes.

The ABARE statement gave no reason for the gap between import and export volumes, and bureau officials could not immediately be reached for comment.

ABARE has forecast demand and supply to be at a parity of 704.8 million tonnes this year.

"Over the next 18 months, thermal coal prices are expected to remain high, supported by the growth in demand for coal from electricity generators in Asia, and infrastructure constraints in Australia and South Africa," ABARE said in its report.

"Growth in demand for thermal coal imports in Asia is expected to continue, particularly in India, the Republic of Korea and Malaysia."

The price of thermal coal, used for power generation and in the making of cement, has more than tripled from a year ago on supply constraints amid powerful Asian demand.

A series of supply disruptions in the key exporting nations of China, Australia and South Africa earlier this year had also helped pushed prices higher.

Thermal coal prices in Australia, a benchmark for Asia, struck a record high of $162.29 in the week ended 20 June, according to globalCOAL's week-to-date Newcastle index.

Thermal coal exports from Indonesia, the world's largest thermal coal exporter, are forecast to increase by 8% in 2008 to 203 million tonnes and by a further 7% in 2009 to 217 million tonnes, as high export prices encourage firms to develop resources that were previously uneconomic.

Coal exports from China - the world's largest producer and consumer of coal - are expected to fall 7% in 2008 to 47 million tonnes from a year ago and to drop a further 14.9% in 2009, ABARE said.

The bureau said China's thermal coal exports, which are managed by a quota system whereby licences are allocated annually to coal exporting companies, could fall in the latter part of this year if the domestic market was not adequately supplied.

In Australia, the world's second-largest thermal coal exporter, thermal coal exports are forecast to increase by 6% to 122 million tonnes in 2008-09, thanks to the commencement of new mines and mine expansions carried out by producers such as Xstrata and Anglo Coal, said ABARE.

In Columbia, further mine expansions planned for 2009 would enable exports from Colombia to increase by a further 6% to 73 million tonnes, ABARE said.

US coal exports are also expected to add to new capacity, thanks to high prices in Europe.

"With Atlantic supply growth forecast to remain limited in 2009, demand for US coal is expected to remain strong, with exports remaining around 26 million tonnes," the bureau said.

By Fayen Wong, Reuters