REUTERS's COAL POLL - Coal prices seen firmer but volatile in 2011

Thursday February 10, 2011 04:27:15 AM GMT
COAL-POLL
* Poll sees higher prices but even more volatility
* China imports may cool in Q2; seen strong for whole year
* Economic growth to boost coal demand worldwide
By Jackie CowhigLONDON,

Feb9,2011 (Reuters) - Coal prices still have potential to rise in 2011 despite recent sharp gains and volatility, analysts polled by Reuters said.The forecasts for average 2011 coal prices given by 22 analysts and industry players polled by Reuters in February were $30-37 a tonne higher than predictions given in January last year but only slightly higher than current values.The forecasts were for the three main physical benchmarks -- thermal coal delivered into Europe and free on board (FOB) South African and Australian ports.

The median forecast for coal delivered in Amsterdam-Rotterdam-Antwerp (DES ARA) in 2011 was $121.00 a tonne, up from $90.00 forecast in January last year. DES ARA prices on average for 2011 are currently around $115.00.
For South Africa's Richards Bay the median forecast was $115.00 a tonne FOB, compared to $85 last year and prices now of $115 while for Australia's Newcastle the median was $126.00, up from $89 last year and compared to spot values of around $123.
For a Table of the full forecast details see.

ASIA DEMAND CONTINUES TO SURGE
A boom in imported thermal coal demand across Asia led by China and India is set to continue for the next several years and will lend further strength to prices.
Although China and India are the biggest importers by far there are several other countries which have emerged as substantial buyers including South Korea, Taiwan and Malaysia and these will absorb increasing quantities of long-haul coal from South Africa and Colombia.
"Once again we rely on Asian demand to be the driver for coal prices but if there were no issues on the supply side, demand from Asia would produce only a slower, steady rise in prices," said Emmanuel Fages at Societe Generale in Paris.

"This time last year some people were expecting China to import 200 million tonnes and while the figure was less, around 140 million, it was still a huge quantity and we expect a similar amount for this year," the analyst said.
China's rapid entry and withdrawal from the import market significantly contributed to the price volatility seen last year and this is also likely to continue in 2011, analysts said.
Most analysts polled agreed that the overall trend was upwards but a series of price shocks -- spikes and falls -- are likely as the market reacts to supply disruptions and the sudden appearance and disappearance of Chinese spot buying

"I think API2 prices will average at least $120 and could end the year above $125, on a combination of Asian demand growth and further supply shocks causing price spikes through the year," said Fages.
Moves in other energy markets will also cause sharp price movements in coal, analysts said. Coal has become more responsive to moves in other markets such as oil and to news which moves energy markets in general, such as the Egyptian unrest which helped propel oil prices to over $100.
"The key thing is that supply might be under less pressure in 2011 than in recent months but we should not underestimate the potential impact of everything which is going on in the Middle East," said Charles Kernot at Evolution Securities.
"If oil goes up, coal will perform pretty well," he said.

ECONOMIC RECOVERY
Coal demand and prices will also be boosted by the general economic recovery in Europe and North America and continued growth in Asia despite China applying the brakes on its speedy growth by raising interest rates, analysts said.
"The improving economic background in Europe and North America should help support coal prices because demand will start to increase. Preliminary economic numbers published recently were looking pretty good," Kernot said.

Last year saw almost every major coal exporting country faced weather-linked supply disruptions and a similar pattern cannot be ruled out for 2011, analysts said.
"Coal has become very volatile and prone to price spikes due to supply disruptions -- which is what happened after the Australian floods and in fact prices now are higher than they were just before the floods," said Fages.

Although some analysts cautioned that weak Chinese demand in Q2 might pull prices down, the overall scenario is for price growth over the whole year.
"We continue to view coal favourably. Even beyond the Australian floods, demand remains extremely strong, with most of the exporting nations facing infrastructural issues," said Barclays Capital's Amrita Sen. (Editing by James Jukwey,sourced:Thomson Reuters)