The report said the rise, up 5% the previous year's figures, will be as a result of coal handling capacity increases at the Port of Newcastle - completed early this year - and future port projects at the Newcastle Port and Queensland terminals expected to be finish during the next 18 months.

It is also being attributed to the ramping up of new projects including the Wambo longwall and Abel underground mine in the next nine months and increased production at new mines including the Ashton longwall and opencut operations Wilpinjong, Boggabri and Tarawonga.

Export figures for the 2006-07 year of 111.6 million tonnes - an increase of less than 1% on the previous year- was attributed to bottleneck constraints and a severe storm affecting the Hunter Valley and Newcastle Port resulted in a loss of about 2.5 million tonnes of throughput.

Thermal spot prices reached record heights of more than $US70 a tonne during August this year but fell in early September as weather conditions in Indonesia improved and Chinese exports rose in a bid to capitalise on the high prices.

Spot prices are expected to remain steady, with any significant reduction dependent on increased availability of export coal from Indonesia.

China remains a driving force in the Australian coal market, increasing its consumption of coal by 12% in the first half of this year compared with the previous year.

The ABARE report explains higher domestic prices in China are as a result of three new production taxes in the Shanxi province that add around $US3.75- $5.60 a tonne to production costs.

The taxes- intended to ensure the sustainable development of Shanxi's mining industry, fund local environment protection programs and funs the rehabilitation of mining areas - were introduced in April this year and have encouraged Chinese producers to look to domestic markets and leading to a drop in exports from China by 28 percent in the first half of 2007.