Black gold

26 February 2008 By Martin Hutchinson

With prices double their yearago level, producers are enjoying a bonanza. It won t stop soon. India and China are both major coal users with few alternatives. Environmentalists may bleat, but the World Coal Institute s 2030 production target may be very conservative.

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Spot thermal coal prices reached $135 per tonne February 25, approximately double their level the previous year. Rio Tinto is currently seeking a contract price of $135 per tonne from Japanese power companies, up 143% from the $55.65 in 2007.

More than 80% of China's power needs came from coal generation in 2007; the government has refused to allow price increases because they would fuel inflation. China has suspended coal exports until April and has cut 2008 export quotas by 40% to 40m tonnes.

Global coal production was 5,370m tonnes in 2006, up 8.8% over 2005 and 92% over the past 25 years, and is expected to reach 7,000m tonnes in 2030, according to the World Coal Institute. China was the largest producer at 2,482m tonnes, followed by the US at 990m, India at 427m and Australia at 329m. India, which generates 65% of its power needs from coal, currently uses 460m tonnes annually, and is expected to use 2,000m tonnes annually by 2030.

Among companies predominantly engaged in coal mining Peabody Energy had a 1year return of 51% to February 25, Consolidated Energy 126%, Arch Coal 72%, Massey Energy 74%, Yanzhou Coal 65% and Centennial Coal in Australia 176%.

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