Newcastle coal price rises on Indonesian shortfall

The price of power-station coal at Australia's Newcastle port rose last week on concern Asian customers will need to buy in the spot market after some Indonesian miners warned they will miss deliveries on heavy rainfall.

Coal for immediate delivery at the world's largest export harbor for the fuel, increased $3.27, or 5 percent, to $70.08 a metric ton in the week ended Aug. 3, according to the globalCOAL NEWC Index. That's near the record level of $70.88 reached in June. Banpu Pcl and Straits Asia Resources Ltd. both announced last week they will miss contracted shipments after declaring force majeure because of excessive rain.

"There will be coal consumers who will be looking for volumes elsewhere and given the tightness of the Asia Pacific market, it really falls on Australia to be the real alternative source,'' said Gerard Burg, minerals and energy economist at National Australia Bank Ltd. in Melbourne. "That's increased volumes out of Newcastle and as a result pushed prices higher.''

The curtailing of shipments from Indonesia is adding more pressure on Australian supplies, already struggling to overcome bottlenecks at the port and on the rail system in New South Wales. Rio Tinto Plc, BHP Billiton Ltd. and Xstrata Plc have been unable to increase shipments enough to fulfill orders after China boosted imports and cut exports to meet demand.

Banpu, Thailand's biggest coal miner, confirmed July 23 it declared force majeure on shipments from its Indonesian mine of Jorong, which has an annual capacity of 3.5 million tons. Limited production resumed on July 29, the company said. Straits Asia, a coal producer with mines in Indonesia, said July 31 the reduced output may result in it missing its 4 million-ton target this year.

Bumi Output

Production at PT Bumi Resources's Arutmin mine in South Kalimantan has fallen below normal levels, Dileep Srivastava, head of investor relations, said in an e-mail statement on Aug. 3. Bumi is Asia's biggest coal producer by sales.

Force majeure is a legal clause allowing companies to default on deliveries because of circumstances beyond their control.

The number of ships waiting to load coal at Newcastle is expected to reach 55 at the end of August and 44 at the end of September, according to the Hunter Valley Coal Chain Logistics Team, which coordinates rail and port movement.

"The vessel queue is anticipated to increase over the next week,'' the group said in a statement on its Web site.

The number of ships waiting to load the fuel rose to 51 this morning, from 49 a week ago, Newcastle Port Corp. said on its Web site. Ships waited an average of 22 days to load coal compared with 43 minutes for general cargo.

The port shipped 2.2 million tons up from 2 million tons last week, it said.
Twenty-five ships with coal departed the port for the week ended Aug. 4, compared with 22 the previous week, Newcastle Port said in a separate statement. Twenty headed to Japan, two to Taiwan and one each to Korea, Gladstone and the Netherlands.

Last week, Korea East-West Power Co., one of six generating units of Korea Electric Power Corp., bought 120,000 tons of coal from South Africa for the first time, a company official said. A coal cargo from South Africa will take about 52 days to be shipped to South Korea, compared with 64 days from Australia.