Asia Coal-Prices near $134 on firm demand, high oil

By Fayen Wong

PERTH, May 12 (Reuters) - Coal prices for power generators
at Australia's Newcastle port, a benchmark for Asia, extended a
near two-month rally to rise to about $134 a tonne in the past
week, bolstered by firm demand and record oil prices.

Thermal coal prices rose $0.63 from a week earlier to
$133.63 a tonne, globalCOAL's NEWC weekly index showed in the
week ended May 10, based on prices at Newcastle port.

"The spot market has definitely picked up in the last two
weeks. More Asian players are out and quietly looking for spot
cargoes," said a Singapore-based trader.

Japanese utilities are expected to soon start seeking spot
shipments for delivery in July and August for summer heating,
industry sources said, while Indian buyers have begun to scour
the market for supplies.

A second Singapore-based trader said high oil prices, which
struck a new record of $126.27 a barrel last week, have also
lent support to coal.

"Its still incredibly cheap to burn coal compared to oil,
so some traders may see that as a reason to push up prices," he
said.

A recent tender by Korea South-East Power Co Ltd (KOSEP),
which closed on May 6, has received several offers with prices
of about $130 a tonne on a free-on-board (FOB) basis, producers
and traders said.

On the supply side, ongoing heavy rainfalls in the coal
producing region of Kalimantan, Indonesia have continued to
affect output and ship-loading for some miners, including PT
Kideco and PT Adaro.

While the wet weather has caused some cargoes to be
delayed, no producer has declared force majeure on shipments,
industry sources said.

In the near term, traders said uncertainties over Chinese
supplies would be the biggest upside risk to coal prices, while
analysts said thermal coal prices could climb higher should
producers divert high grade thermal coal supplies into the
coking coal market.

"The wide price differential between thermal and semi-soft
coking coal should trigger a transfer of high grade thermal
coal into the semi-soft coking coal market, tightening further
thermal coal supply," said Mark Pervan, a commodities analyst
at the Australian and New Zealand (ANZ) Bank.
(Reporting by Fayen Wong)