December 04, 2008

Seaborne thermal coal market to stay tight in 2008-09

Credit Suisse resources analyst Mr Peter O'Connor in a research report said that the seaborne thermal coal market is expected to remain tight in 2008 an 2009 driven by China and India increasing imports.

Mr O'Connor said that “Though Indonesia is expected to increase exports as production disruptions caused by heavy rains are overcome and new mines come on stream, supplies will be unable to keep up with demand, especially as Australian exports continue to be hampered by rail and port infrastructure constraints. He added that thermal coal prices will also continue to be supported by strong oil prices which shift more energy demand into coal.”

Mr O'Connor said that “We are revising up our thermal coal prices by USD 10 a tonne from our previous forecast.” He added that Credit Suisse's new 2008 estimated seaborne thermal coal price is USD 80 a tonne while the long term price forecast is USD 60 a tonne.

Credit Suisse estimates there were potential losses in Indonesian production of up to 20 million tonnes in the second and third quarter of this year. Supply should be stronger in the current quarter. Mr O'Connor said that there may be a supply response to the strong prices from Chinese exporters but this is likely to be limited as the Chinese domestic market for thermal coal is also tight.