Coal prices seen rising again in 2005
Purchasing staff -- Purchasing, 11/8/2004 10:38:00 AM
Prices for thermal coal used to fuel power plants are expected to reach new highs in 2005, buoyed by continued international economic growth and surging demand for electricity. With no major changes in supply fundamentals in sight, thermal coal markets will remain under-supplied next year. That will boost contract prices by an average 16%. As for the “ripple effect” in North American spot pricing, the mavens are talking 20% increases.
“World thermal coal prices will still remain high in historic terms next year,'' at $50 to $55 per metric ton, suggests Clyde Henderson, director of Energy Economics. Demand continue to be strong, but he sees no replay of the 68% spike in global thermal coal prices in 2004, as benchmarked by the Australia-Japan supply contract. Other analysts also see pricey coal ahead. “Coal is the world's most rapidly growing source of primary energy with international growth running at an average annual rate of around 5% over the past four years," says AME Mineral Economics' thermal coal analyst Greg Dean-Jones. He forecasts traded thermal coal demand of more than 500 million metric tons this year and 560 million metric tons by the end of the decade. The Asia -Pacific region is the largest market, representing 4% of world trade, and is growing 10% annually because of increasing demand from developing countries, including China. There also has been increased demand in the U.S. and Mexico because of the rush to build new power stations in the region following the 2000 Californian power crisis. That’s why some analysts suggest thermal coal prices as high as $62/metric ton on the U.S. spot market next year.
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