“In the case of coal, China will remain a major source of competition in north-east Asian markets as it exploits its vast coal reserves and expands its transport and port infrastructure,” she said. “Government policies that favour the increased exports of coal have been instrumental in achieving the large increase in coal exports from China.”
Schneider said deregulation in the electricity sectors of some key Asian economies, including Japan and Korea, could change the way fuel procurement decisions are made, placing greater emphasis on cost and increasing the risk that utilities are prepared to take.
“This could provide a major challenge for Australian fuel suppliers to remain cost competitive,” she said.
ABARE forecast that the real value of Australian coking coal exports would fall to $7.8 billion in 2002/03 from $8 billion in 2001/02. The value of Australia's thermal coal exports would fall to $4.9 billion in 2002/03 from $5.3 billion this year. This drops the total forecast value of Australian coal exports in 2002/03 from $13.2 billion to $12.6 billion.
The total annual volume of Australian coal exports is expected to rise by 2.5% per year to 223Mt by 2006/07.
Tightening supply in 2002 is expected to support further modest increases in metallurgical coal prices during the year. Over the medium term, hard coking coal prices were expected to continue their long-term decline in real terms as the adoption of new mining technologies and improvements in mine efficiency lead to lower mining costs.
World trade in metallurgical coal is expected to fall slightly in 2002 to under 194Mt before expanding at an average annual rate of 1% to 2007.
The spot price of thermal coal is expected to remain well blow last year's negotiated ceiling price with Japanese utilities of US$34.50 a tonne over the first half of 2002. This, plus the ready availability of competitive coals from a range of suppliers, may lead to some downward pressure on negotiated prices over the current year, ABARE said. After 2002 the real price of thermal coal is projected to fall moderately, at an average annual rate of 2%.
Speaking at the same conference, managing director of Enex Resources, Peter Coates, believes that growth in demand for thermal coal will not be matched by supply, making another gain in the benchmark price possible.
Coates said his company expected 2002 global excess demand of around 7.5Mt, a turnaround of about 15Mt from excess supply over demand of 7.7Mt in 2001. Enex (now owned by Xstrata) is Australia's second largest thermal coal exporter, shipping about 17Mt of thermal coal overseas a year. The company is also one of the four largest thermal coal exporters in Australia, South Africa and Colombia which produced 80% of thermal coal in 2001, compared with 44% in 1998. Others include BHP Billiton, Rio Tinto and Anglo American.
Enex figures suggest that total global demand for thermal coal should rise to 409.6Mt this calendar year from an actual 377.9Mt last year as demand from power utilities grows. Demand from north Asia is expected to rise to 189.6Mt from 176.8Mt in 2001. Australia was expected to supply 89.4Mt in 2002 against 86.9Mt in 2001, while China was expected to supply 73.5Mt from 65.7Mt in 2001.
Coates said the turnaround should be positive for the major exporters to both the Pacific and Atlantic basin markets.
