LondonCommodity Asia Coal-Prices rebound above $64 as demand picks up

Prices of power-station coal from Australia, a benchmark for Asia, rose to a one-month high of above $64 a tonne this week, as earlier low prices drew more buyers into the market. Traders said regional buyers have recently stepped up their tender activities to seek short and mid-term coal supplies, with Chinese utilities being the most active in the market. A rally in crude oil prices, up about 15 percent this year,

has also helped bolster the price of coal as it is an alternative fuel source. Thermal coal prices on the globalCOAL Newcastle weekly index rose about 10 percent from a week ago to $64.15 a tonne in the week ended April 6. Prices are down $4.65 from mid-last week. The index is now at its highest since Feb. 28, when spot prices were at $65.32 a tonne. "Demand picked up right after Aussie coal prices fell below $60. That drew a lot more buyers out to the market hoping to secure supplies at a bargain," said a producer source. "And demand from China has been particularly strong since imported coal is still much cheaper than domestic supplies, even though the imported material is of better quality." Prices of coal in China have been hovering around $86 a tonne, based on coal with a heating value of 5,800 kcal/kg (NAR). At current spot prices, industry sources said Chinese utilities were still able to save about $10 a tonne by importing coal from Indonesia and Australia, even after factoring in freight charges and various import taxes. The market is keenly watching contract negotiations between power producers and coal sellers in China, amid fears that coal suppliers, such as Shenhua Energy Co and Yanzhou Coal, could agree to a price reduction and cut utilities' demand for coal imports. China's No. 1 utility, Huaneng Power International, said last week it has retreated from its bid to negotiate for lower coal contract prices and was hoping to settle 2009 prices at last year's 504 yuan ($73.75) per tonne.

Producers and trade sources said Indian buyers were also seeking large amounts of coal, although they were generally looking for below-market prices. Industry participants will also be keenly eyeing tender results in the region to gauge market sentiment. Outstanding tenders include Taiwan Power Co's tender to buy 0.7 million

tonnes of the fuel as well as Korea South East Power's (KOSEP) tender to buy 1.12 million tonnes for delivery between June and August.

Source: Reuters