* La Nina signals strong cyclone season in northern
* Indonesia output already 5 to 10 percent behind
* Australian thermal coal could climb to $120/tonne
By Rebekah Kebede and Fitri Wulandari
PERTH/JAKARTA, Nov 15 A strong La Nina effect
threatens more drenching of waterlogged coal production areas
in Australia and Indonesia over the next six months, cutting
exports and driving up prices just as Chinese winter demand
As a result, prices for Australia's thermal coal, the Asian
benchmark, could move as high as $120 per tonne before the end
of the year from around $109 now, said Mark Pervan, head of
commodity research at ANZ Bank in Sydney. A price above $120
would be the highest since September 2008.
"The likelihood of a strong winter coming through in north
Asia, dovetailed with what looks like a pretty tight supply
backdrop, will probably see the market move up another $10 a
tonne," Pervan said.
Australia is the world's largest coal exporter and,
combined with Indonesia, produces more than 10 percent of
global thermal coal supplies.
The La Nina effect has raised forecasts for rainfall in
both top coal exporters, nearly doubling the number of cyclones
expected in Australia's northeastern coal belt to six or seven
from an average four.[ID:nSGE69I02V]
"We're heading into the time of year between now and April
next year where cyclone season hits up north," said Gavin
Wendt, a senior resource analyst at Mine Life in Sydney.
"We always get a seasonal spike in thermal coal pricing
around about this time of the year, but that's going to be
exacerbated by strong Chinese demand and don't forget Indian
buying as well."
Chinese demand has escalated recently as the world's
largest coal consumer tries to stockpile ahead of a frosty
winter, with buyers hunting for coal deals both in Asia and
also casting their nets farther afield, most recently striking
a deal for South African coal. [ID:nLDE6A10T2]
Although Chinese stockpiles are relatively high at more
than 6 million tonnes, spot supplies in China have tightened
over the past month as cold weather disrupted some coal
"I think we'll find that the Chinese will re-stock quite
aggressively in December," ANZ's Pervan said.
Indian import demand for coal is expected to grow by more
than 80 percent by 2012, and Indian buyers, already one of
Indonesia's main coal customers, are expected to feed their
growing appetite by sourcing coal from Indonesia.
China coal imports/exports: link.reuters.com/bux72q
Coking coal imports: link.reuters.com/cux72q
China coal imports/Australian Newcastle index price:
India coal imports &
INDONESIA OUTPUT TRAILS TARGETS
Unseasonally wet weather has already hit Indonesian
production, particularly from smaller miners, and with months
of of rain still ahead, exports are likely to be affected into
"The majority of Indonesian coal producers have already
seen their output falling about 5 to 10 percent below where
they usually are with respect to their targets at this time of
the year," Andreas Bokkenheuser an analyst with UBS in
Smaller miners have been particularly hard hit as they fall
months behind their output targets, wiping out tonnage they
need to ship for existing contracts.
"We have to reject requests from buyers even for next year
delivery because we don't have any coal. We still have 800,000
tonnes in outstanding contracts that we need to fill for this
year," said one East Kalimantan producer with an output of
about 200,000 tonnes a month.
Some of Australia's thermal coal production has already
been affected by unseasonal rains in Queensland state, even
though the region produces mostly coking coal.
Predictions that northeastern Australia will get soaked
during cyclone season point to a high probability that the
world's largest coal port, Newcastle, will suffer export
backlogs this season, analysts said.
Wet weather has resulted in export disruptions from
Newcastle as both production and transport to the port are
Some in the industry have warned that this cyclone season
may resemble the 2007/2008 cyclone season, when strong demand
before the global financial crisis combined with wet weather to
cause prices of both coking and thermal coal to spike.
"Time will tell how much damage La Nina can make, but at
the current stage, it's not looking good at all. It will be
2007 all over again," one Sydney-based trader said.
(Editing by Ed Lane)