Winter coal demand to absorb supply glut -analysts

LONDON May 7 (Reuters) - The seasonal winter rise in global coal demand for power generation will absorb the current supply glut and boost prices, Evolution Securities analyst Charles Kernot told Reuters TV on Thursday.

"The forward curve for (benchmark) API2 coal swaps is $100 for 2010 on average, which reflects a reversal of the glut we've got at the moment and a move into a more natural market next year," Kernot said.

"We will see price support from Q3/Q4 this year but it's a big call to predict prices will go back over $100 a tonne again," said Clive Murray, Chief Executive of London Commodity Brokers, appearing on the same programme.

Coal prices fell from a record high of $200 a tonne delivered into Europe last September to around $60.00 at present.

China and India will continue to drive demand growth in Asia but Europe will also see a more balanced market from Q3 this year, he said.

Demand for coal in Asia is a major support factor for coal prices, Murray said.

"In the near-term delivered prices of coal in Europe will soften because utilities will be burning gas before coal as it is cheaper," he said.

"But any economic stimulus measures in China and India will require power so we will see an uptick in coal demand and prices because of that."

India has been importing up to 35 million tonnes of coal during the past few years but this is set to rise to 50 million tonnes a year in the forseeable future, he said.

China has been importing steadily at a rapid rate since January.

European utilities have been increasing coal stocks during the past few months partly to take advantage of the $20 a tonne discount between prompt and forward prices and partly because their consumption has fallen due to lower power demand.

Utilities have more recently been happy to get rid of some of their surplus stocks because they are running out of stockpiling space, Murray said.

(Reporting by Jackie Cowhig; Editing by Keiron Henderson)