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China Gridlock Pushes Coal to Four-Month High: Energy Markets
2010-10-27 11:07:54.820 GMT
By Dinakar Sethuraman
Oct. 27 (Bloomberg) -- China is driving up world coal
prices as clogged roads and railways from Beijing to Tibet
restrict deliveries in the world's fastest-growing major economy
while the country tries to build stockpiles ahead of winter.
A jam held up traffic for as many as 10 days along the
country's main east-west highway in August, underscoring a
crisis that may buoy prices for the next two years, according to
Daniel Brebner, an analyst at Deutsche Bank AG in London. The
China Coal Transport and Distribution Association says it may
take up to four years to ease the gridlock.
Government incentives and lower wages away from coastal
regions are boosting Chinese inland development, creating
transport disruption that is hampering access to domestic
supplies and prompting coal consumers to turn to foreign imports.
Power-station coal at the Australian port of Newcastle and South
Africa's Richards Bay climbed to four-month highs last week,
according to data compiled by IHS McCloskey, a Petersfield,
U.K.-based researcher.
"Rising domestic prices could prompt a pick-up in demand
for cheaper imports, potentially buoying the Asia-Pacific
market," said Marcus Pearl, associate director for commodity
sales at Australia & New Zealand Banking Corp. in Singapore.
Chinese power stations are trying to increase inventories
in preparation for the colder months, with stockpiles at the
nation's largest grid operators rising 6.6 percent in the month
to Oct. 10, according to data from the China Coal Transport and
Distribution Association. China, whose economy surpassed Japan's
as the world's second-biggest from April to June, boosted
imports by 42 percent to 122 million tons in the nine months
through September, according to customs data.
Cheaper Imports
Benchmark prices at the port of Qinhuangdao rose to $115.93
a metric ton, a three-month high, IHS McCloskey data show.
That's about 25 percent higher than coal at Richards Bay and in
Indonesia, China's biggest supplier, 17 percent more than
Newcastle's and 38 percent higher than Colombia's.
Imports will be supported by rising electricity demand as
winter approaches, according to New York-based Commodore
Research & Consultancy. Northwest China will have snow and
southwest areas rain until Oct. 28, the China Meteorological
Administration said on its website this week.
The Bohai-Rim Steam-Coal Price Index, or BSPI, climbed 2
percent to 750 yuan ($112) a ton today from a week earlier,
according to the Qinhuangdao Seaborne Coal Market website. The
weekly gauge tracks power-station coal prices at six major
Chinese ports.
Indian Demand
"We expect coal prices to increase because of demand from
China, Japan and Korea, and of course India will be importing in
a big way," said T.K. Chatterjee, head of fuel sourcing in New
Delhi at NTPC Ltd., India's biggest power producer. India's
thermal coal imports surged 16 percent in the year ended March
as electricity demand jumped, according to Coal India, the
state-owned mining company.
Coal at Newcastle rose 1 percent to $98.80 a metric ton
last week, the highest level since June 18, according to IHS
McCloskey. Prices at South Africa's Richards Bay, the world's
second-biggest export harbor for the fuel, climbed 4.4 percent
to $92.97, also the highest since June and the biggest gain in
five months, the data showed.
Thermal coal prices will average $110 a ton next year and
$120 in 2012, Deutsche Bank's Brebner said on Oct. 7. Coal use
in Asia climbed 6.4 percent last year, more than a 0.8 percent
increase in oil consumption, according to BP Plc.
Rains, Railways
Flooded mines in Indonesia and Colombia and are also
disrupting output, while South Africa's export growth has been
hampered by a lack of rail capacity.
The fuel in Indonesia, the world's biggest thermal coal
exporter, climbed to $92.68 a ton on Oct. 11, according to
monthly reference prices released by the Directorate General of
Coal, Minerals and Geothermal at the country's Energy Ministry.
It was the first gain in four months.
Exports from Richards Bay may be "limited" for the next
two years because of inadequate railroad capacity, DnB NOR ASA
said in a report on Aug. 12.
Xstrata Plc, the world's largest exporter of thermal coal,
said third-quarter output fell 5 percent due to mine closures in
South Africa and rain in Colombia.
Lower-than-targeted production in Indonesia this year
because of rain, coupled with rising Indian demand, may drive
coal to $102 a ton by year-end, Bob Kamandanu, the chairman of
the Indonesian Coal Mining Association, said on Oct. 14. Prices
may average between $90 and $100 a ton next year, he said.
"Given the strength in demand, and supply disruptions
already evident in the market, prices can find further
support," said Amrita Sen, an analyst at Barclays Plc in London.
For Related News and Information:
Top commodity stories: CTOP <GO>
Top energy stories: NRGTOP <GO>
Top stories: TOP <GO>
For Indian coal sector stories TNI INDIA COAL <GO>
--With reporting by Archana Chaudhary in New Delhi and Yoga
Rusmana in Jakarta. Editors: Jane Lee, Clyde Russell
To contact the reporter on this story:
Dinakar Sethuraman in Singapore at +65-6212-1590 or
dinakar@bloomberg.net
To contact the editor responsible for this story:
Clyde Russell at +65-6311-2423 or
crussell7@bloomberg.net
