POLL-Coal to slump in 2009 as economic woes crunch demand

By Fayen Wong

PERTH, Nov 27 (Reuters) - Prices of thermal and coking coal
will fall 20 and 26 percent respectively in 2009, a Reuters
poll showed on Thursday, thinning miners' profits as a slowing
global economy chews into demand.

Prices of Asian thermal coal, mainly used to generate
power, may fall to $100 a tonne in the 2009 Japanese fiscal
year, down 20 percent from this year's agreed price of $125, a
median forecast of 10 analysts said.

Prices of premium hard coking coal, used by steel makers,
are forecast to slide 26 percent to $225 a tonne, after posting
stellar gains of more than 200 percent to $305 a tonne in
2008.

But the broad range of estimates for coking coal, from $140
to $300 a tonne, shows how hard it is to gauge the impact of
demand cuts by steel mills, which have reduced production as
global financial woes bite.

"The spike in both thermal and coking coal markets has
largely been triggered by supply disruptions earlier this
year," said Gerard Burg, a commodities analyst at the National
Bank of Australia.

"But weaker demand conditions and a possible increase in
supplies will dampen prices in 2009."

Thermal coal prices were generally seen as the most
resilient but demand was still expected to be squeezed by
recent collapses in the prices of of oil and gas, which are
alternative fuels used in power generation.

Amid a sharp falloff in domestic demand, a likely increase
in Chinese thermal coal exports could also create additional
slack in the international market.

Greater port capacity in Australia -- the world's
second-largest exporter of thermal coal -- as well as the
diversion of semi-soft coking coal from the steel industry to
power generation would also swell supplies and drag thermal
coal prices lower, analysts said.

Benchmark Australian spot thermal coal prices have tumbled
more than 60 percent in just four months from their July peak
of $201 a tonne, to hover at a 13-month low of about $77.

Evidence is mounting that global economic weakness has
dented fuel demand, with industrial users from Europe to Asia
cutting production because of slowing exports.

World No. 1 coal importer Japan slid into its first
recession in seven years as exports crumbled, with some fearing
an escalation of the global crisis may have put the economy on
course for its longest recession.

As a growing number of economies head into recession,
traders and producers said the outlook for thermal coal
consumption by industrial users, such as cement and chemical
makers, was dim.

For more on Australia spot coal prices, click on
[COAL/ASIA]

COKING COAL PRICES TO SLUMP

As for coking coal, demand destruction remains the key
downside factor, with a growing army of steelmakers, such as
ArcelorMittal, Baosteel Group and Evraz, slashing output as
prices, and demand, contract.

"We envisage sharper price declines for weaker brands of
coking coal, semi-soft and pulverized coal injection (PCI),"
Goldman Sachs said in a Nov. 17 report.

Goldman Sachs analyst Malcolm Southwood added that
suppliers of lower quality PCI and semi-soft coal could become
distress sellers into a weakening thermal coal market if
steelmakers cancelled orders dramatically.

Miners which produce coking and thermal coal include:
Macarthur Coal Ltd (MCC.AX: Quote, Profile, Research), Felix Resources Ltd (FLX.AX: Quote, Profile, Research),
Centennial Coal Ltd (CEY.AX: Quote, Profile, Research), Gloucester Coal Ltd GLC.AX and
Whitehaven Coal (WHC.AX: Quote, Profile, Research). Global mining majors Xstrata (XTA.L: Quote, Profile, Research),
BHP Billiton Ltd/Plc (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) and Rio Tinto Group/Plc
(RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research) also have operations in Australia.

Still, it was unlikely Australian coal miners would end up
having to sell coking coal at a loss, despite the expected
slump, some analysts said.

"We currently judge that prices will be set at levels which
do not push producers into loss-making and deter future
investment in new capacity, something the industry desperately
needs," said Macquarie's Jim Lennon.
2009 Asian coal price forecasts ($ per tonne)#:

Thermal Coal Hard Coking Coal
ANZ Bank 75.00 (100.00) 155.00 (231.00)
Goldman Sachs JBWere 90.00 (100.00) 170.00 (260.00)
UBS Bank 100.00 (125.00) 180.00 (250.00)
Citigroup 100.00 (160.00) 250.00 (350.00)
Deutsche Bank 100.00 (144.00) 275.00 (275.00)
Credit Suisse 100.00 (160.00) 300.00*
Macquarie Bank 105.00 (170.00) 140.00 (350.00)
ABN AMRO 105.00 (165.00) 200.00 (330.00)
Nat'l Australia Bank 120.00* 285.00*
Merrill Lynch* 130.00* 300.00*
---------------------------------------------------------
Median 100.00 225.00
High 130.00 300.00
Low 75.00 140.00
# Banks' previous forecasts are in parentheses.
* Forecasts are being reviewed.
(Reporting by Fayen Wong; Editing by Clarence Fernandez)