Black Gold

Newcastle Herald

Tuesday June 24, 2008

IAN KIRKWOOD INDUSTRIAL

NEWCASTLE export coal is selling for between $170 and $235 a tonne, turning a once low-price product into black gold.

With prices for all forms of fossil fuel energy riding high, the Hunter coal industry is one of the biggest contributors to a 40 per cent increase in commodity export earnings unveiled yesterday by the Australian Bureau of Agricultural and Resource Economics.

The Hunter Valley supplies most of Australia's thermal coal (for power stations) and though the volume of exports increased by 3 per cent in the 12 months to June 30, their value rose by about 35 per cent to at least $9 billion.

Japanese buyers agreed to a 125 per cent price increase in April, taking the contract price to $US125 ($133) a tonne.

The bureau said that steaming coal exports for 2008-09 were likely to hit $15.9 billion.

This income is all the more astounding when State Government records show that from 1995 to 2004, the value of all NSW coal exports hovered at between $3 billion and $4.5 billion.

The big earnings increase will help the State Government's finances.

Coal royalties are likely to surpass the $840 million predicted at the recent state budget and may even match the take from poker machine taxes, estimated this year at $1 billion.

"The record contract prices reflect a combination of

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State cashes in on Hunter jackpot

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strong growth in coal-fired electricity generation in Asia and limited increases in export growth from major suppliers such as Australia, South Africa and China," bureau coal analyst Alan Copeland said in yesterday's report.

The coal chain bottleneck that has been such a bugbear for mining companies has become a big reason for the price increases, as customers around the world seek their share while supply is short.

The Newcastle shipping queue has about 40 vessels but the late-loading charges of about $1.50 a tonne are less important than they were when coal was bringing $40 a tonne.

Spot prices for one-off cargoes have gone wild with the Newcastle index for steaming coal at $US162.66 ($173.04) on Friday.

"In mid-June, Newcastle thermal coal spot prices traded at a record $US166 ($176) a tonne, partly reflecting rising prices of thermal coal substitutes such as oil and gas," the bureau's report said. "Over the next 18 months thermal coal prices are expected to remain high, supported by the growth of demand . . . and infrastructure constraints in Australia and South Africa."

About 85 per cent of Newcastle's export production is steaming coal and the rest is semi-soft coking coal, which has been selling for as much as $US220 ($235) a tonne.

Editorial

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© 2008 Newcastle Herald

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