Dow Jones Newswires reported that coal hauler Asciano expects to wind back its business with domestic power generators to focus on more profitable export markets, particularly for steel making's coking coal.

Mr David Irwin director of the Pacific National Coal division said that the company would only bid for domestic business that hit strict profit targets. He added that "We're not sitting here saying we're going to retain a domestic operating monopoly at lower returns. If we can't get the right returns, we'll take that capital and put it in somewhere else."

The remarks are indicative of how strong Asian demand for coal is transforming the market in Australia, the world's biggest exporter of the commodity.

Until 2005, most Australian coal sold for about USD 40 to USD 80 per tonne, and domestic power stations are still locked into long term contracts near the bottom of that range. But exports of the thermal coal used in power generation now cost around USD 120 per tonne, while the coking coal used in steelmaking rose as high as USD 350 per tonne earlier this year.

Mr Irwin expects Asciano's market share in thermal dominated NSW to sink to 60% in the next few years, from today's 80% level. However, while Australian and NSW businesses will decline as a proportion of Asciano's overall business, the company is not working to shrink them in absolute terms.

He said that a contract with a NSW based power station was the only one to lapse when Pacific National re wrote all its customer contracts over the last four years. The division is also in talks with utility Alinta to sell back a contract for hauling coal to a power station in Port Augusta, South Australia.

He said that Xstrata has set up its own coal haulage division for some of its mines in NSW, while the joint venture between BHP Billiton and Mitsubishi would likely look to build track and run some trains to haul coal from its mines in Queensland's Bowen Basin.

(Sourced from www.theaustralian.com.au)