Steam coal imports into the United Kingdom alone increased by 40.5% in the March quarter, partly due to low coal imports in the March 2003 quarter but primarily a result of low coal inventories leading into last winter.

 

The high growth in steam coal imports into Korea and Taiwan is being driven primarily by ongoing economic recovery in both countries, reported Clyde Henderson of Energy Economics.

 

“The increase in imports, coupled with the supply side constraints experienced in most of the major steam coal exporting countries since late last year, has seen steam coal spot prices smash record after record this year,” Henderson said. “The Newcastle spot price broke through the US$60/t mark in late May, having nearly trebled from US$23/t 12 months ago.”

 

GDP growth in South Korea is expected to rise from 3.1% in 2003 to 5.5% in 2004 while Taiwan’s GDP growth is forecast to rise from 3.2% in 2003 to 4.9% in 2004. Coal imports into these countries has risen despite no new coal-fired power stations being commissioned in either country over the past year. But new coal-fired units will be commissioned in both countries over the next couple of months.

 

On the supply side Henderson said major steam coal exporters still face some problems: In Australia Newcastle rail capacity restrictions and the worse than usual wet season in Queensland restricted

 

Growth in Australian steam coal exports were limited to only 2.9% in the March quarter related to Newcastle rail capacity restrictions and the Queensland wet season. In China increased domestic demand has slowed growth of steam coal exports so far this year, with fears of a fall in steam coal exports over the summer season. Indonesia was impacted by a worse than usual wet season. In South Africa rail capacity constraints have limited Richards Bay exports.

 

“The bottom line is that steam coal spot prices are likely to remain very high through the northern summer, but then could decline over the remainder of the year as increased Indonesian exports should outweigh any decline in Chinese steam coal exports,” he said.