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Global coal price heading for big hike over flood - Mr Champion

Steel News - Published on Mon, 31 Jan 2011

Resource Intelligence quoted Mr Bill Champion MD of Rio Tinto Coal Australian as saying that coal prices are headed for big, sustained price rises on the back of the Queensland and NSW rains, with coking coal only likely be capped once they start to make the price of steel too expensive.

He said that the effects of the Australian floods were evident in spot pricing and had been compounded by wet weather in Indonesia, South Africa and Colombia. He added that \"It seems like our industry worldwide is having weather related events impacting supply. It really depends on what happens with pricing and how high that\'s likely to get before it really has a knock on effect, for the steel producers in particular, and whether they can pass those along to the customer.\"

While contract coking coal prices for this quarter are sitting at USD 225 a tonne, spot prices reportedly rose to USD 385 a tonne last week and were tipped to go through USD 400 to a new record this week.

Mr Champion said that he did not believe prices would rise to USD 500, as has been suggested by some commentators. He added that \"There are speculators out there tossing around USD 400 to USD 500 a tonne. I think that\'s a bit of a stretch. If there\'s a tonne that\'s sold at that price, I certainly hope its ours.\"

He said that Rio\'s Queensland mines were still under force majeure and it was too early to give estimates on the effect of the weather on this quarter\'s production.

Mr Champion is also MD of Rio\'s NSW coal subsidiary Coal & Allied, which reported a 37% drop in full year operating profit after tax to USD 586 million, despite flat production.

The drop came as a rising Australian dollar offset gains in coal prices and as operating costs rose. The increased costs were because of a combination of inflation and the company mining more waste to access coal for expanded production between now and 2014.

Including proceeds from the 2010 sales of the Maules Creek and Vickery projects, Coal & Allied\'s net profit after tax rose 20 per cent to USD 704 million. A final, fully franked dividend of USD 1.38 a share was declared, bringing the total dividend for the year to USD 5.88, up from USD 5.10 a share in 2009. The company is planning to boost total production at its mines from around 25 million tonnes to between 40 and 43 million tonnes by 2014.

Mr Champion said that Coal & Allied, if the weather allowed, wanted to increase 2011 production by between 5% and 10%.

Separately, Queensland\'s Macarthur Coal said that it sold 1.2 million tonnes in the fourth quarter, down by 20 % from the previous quarter. Attributable production fell 24% to 966,500 tonnes.

It added that \"Operations, although returning to average production capacity, continue to be subject to significant delays in production and sales due to wet weather.\"

Gloucester Coal said that its mines, in NSW were relatively unaffected by wet weather, leaving it well placed to take advantage of rising prices. Production still slipped 11% from a year earlier, to 438,000 tonnes.

(Sourced from www.resourceintelligence.net)

Posted By : admin on Mon, 31 Jan 2011
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