* China mining caps, new transport rules boost coal prices
* Firm demand elsewhere also supports coal markets
* Physical coal price rally: tmsnrt.rs/2doq6tU
* Coal futures prices: tmsnrt.rs/2dmXlkM
* Technicals chart: tmsnrt.rs/2dnKcaW
(Adds comment and background on European demand)
By Henning Gloystein and Nina Chestney
SINGAPORE/LONDON, Oct 4 Physical thermal coal
prices hit their highest level since the start of 2014 on
Tuesday after tougher Chinese transport rules raised freight
costs, adding to the earlier impact of Chinese caps on mining.
Coal prices started to soar after China introduced
regulations in April to rein in rampant production overcapacity
by limiting the number of days that miners can operate.
Prices were given a further boost in late September when
China's Transport Ministry introduced stricter rules for land
transport, which pushed up freight costs.
"The new rules are expected to effectively crack down on
freight over-loading by setting up higher standards, imposing
stronger penalties and enhancing inspections," Citi said in a
note to clients at the end of September.
The biggest impact has been on Australian coal, the main
price benchmark for the Asia/Pacific region, and a core supplier
Australian prompt Newcastle cargo prices have
shot up 12.8 percent since the end of September to $82 per
tonne, their highest since January 2014. Newcastle cargo prices
are up 68.4 percent from multi-year lows touched in January.
One trader said coal prices would keep rising until the
situation in the Asia/Pacific region changes, which might not be
until the end of the first quarter next year.
Another trader said China's new policies had left the
world's biggest coal consumer "desperately short" of supplies at
a time when demand seasonally strengthens ahead of winter.
Thermal coal imports surged in August, rising 20 percent
month-on-month to 20 million tonnes.
Morgan Stanley, however, said it was possible domestic
Chinese coal supplies could rise sharply in October and November
to prevent a supply shortfall, and this "would be a short-term
bear point for all coal prices".
In a move to boost local supplies, China last week ordered
major mines to raise thermal coal output by another 500,000
tonnes per day.
NOT JUST CHINA
Despite the near-term downside risk to prices, there are
other supportive factors, including firm demand from developed
markets such as South Korea, and across most emerging markets,
as well as output cuts in Indonesia and Australia.
"An added bullish factor is by way of increased coal usage
from the European power sector as a result of all the nuclear
reactors out of action," said Wayne Bryan, analyst at
consultancy Alfa Energy.
French utility EDF said last week it would carry
out tests on some nuclear reactors during the winter months,
triggering fears about the French system's ability to meet peak
demand if temperatures fall below normal.
In Europe, coal import prices into Amsterdam, Rotterdam or
Antwerp (ARA) are up 12.9 percent since the end
of September at $71 per tonne, their highest since December
2014, and 69 percent above first-quarter lows.
In the futures market, API2 2017 coal prices
have risen to $65.75 a tonne, their highest since January 2015.
Technical analysis suggests that futures might rise as high
as nearly $80 a tonne in the next six months the contract has
broken a key resistance level of $62.83.
(Additional reporting by Melanie Burton and Sonali Paul in
Melbourne and Wang Tao in Singapore; editing by Susan Thomas and