Reuters reported that Colombia's largest coal exporter Cerrejon sees Asian demand propelling more Colombian coal to Europe and that demand will also keep prices at current levels.
Analysts said that the overall trend for coal prices this year is upward but a series of price shocks is likely as the market reacts to supply disruptions and the sudden appearance and disappearance of Chinese spot buying.
Mr Leon Teicher president of Cerrejon told reporters that "Long term (the current price of coal) is relatively sustainable because of the dynamics of supply and demand in the world. China, India, Asia are growing and taking a lot of the volume from South Africa and therefore leaving more space open for us in Europe."
Prices hit a peak of USD 130 a tonne early in January when sentiment after Australian floods sent prices to a 12 month high. An April Colombian only cargo was bid on February 16th 2011 at USD 115 against an offer at USD 117.5.
Colombia, one of the top producers of high quality thermal coal, saw a dramatic increase in exports to China last year although the main markets for Colombian material remain the United States and Europe.
Neither coal exporters analysts nor officials believe the destination make up of Colombian coal exports will shift dramatically, though the Latin American nation has also seen increased exports to Japan and South Korea.
Mr Teicher said the company, a JV between BHP Billiton, Anglo American and Xstrata had sent less than half a million tonnes to Asia so this year.
Cerrejon and union workers signed a two year compensation agreement earlier this month, avoiding a strike at a time when the company is trying to recover production following heavy rains across the country last year.
Mr Teicher said Cerrejon exported 31.5 million tonnes in 2010 but produced only 30.3 million tonnes. He added that "We had intensive use of our inventories."
The company still expects production to hit 32 million tonnes or the mine's nominal capacity in 2011, while Mr Teicher also said he expected a shareholder decision on the mine's expansion plan later this year.
Canada's SNC Lavalin Group Inc and a partner have been awarded the expansion contract for a project to boost output to 40 million tonnes annually.
Mr Teicher said that "I have not yet presented the expansion project for shareholder approval and I expected to do so in the next few months."
He said that Cerrejon will close its port for 20 days from around February 20th 2011 for routine maintenance and clients have been advised. It plans to replace parts of the ship loader.
(Sourced from www.reuters.com)
