Newcastle Coal at 6-Month Low on Concern Chinese Demand Slowing

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

29 Sep 2008

Power-station coal prices at Australia's Newcastle port, a benchmark for Asia, fell to near their lowest in six months on concern Chinese demand is slowing. The weekly index for power-station coal prices at the New South Wales port dropped $8.32, or 6.1 percent, to $128.98 a metric ton in the week ended Sept. 26, according to the globalCOAL NEWC Index. The index has declined 34 percent since reaching a record $194.79 a ton in the week ended July 4. Coal demand in China, the world's biggest consumer of the fuel, may ease after China Shenhua Energy Co., its biggest producer, boosted output by 14 percent in August. The Newcastle index also tracked oil prices and freight rates lower on concern an economic slowdown is spreading from the U.S.
``There is growing concern about regional demand coming off quite sharply and it is emanating out of China,'' Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne, said today by telephone. ``There is increasing reports that they are becoming well-stocked and there seems to be a declining trend in ports.''
Xstrata Plc, the world's largest exporter of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle. The monthly index fell 13 percent to $160.90 a ton in August from $184.51 in July.
There are reports a number of power stations in China have coal stocks for 20 days of supply, an increase from lows of about three days of supply earlier this year, ANZ's Pervan said.
``The other warning sign is the sharp drop in freight rates in the past couple of weeks,'' Pervan said. The decline ``has certainly been quite sharp.''
The Baltic Dry Index, a measure of shipping costs for commodities, declined the most on record on Sept. 26 as Chinese steelmakers boycotted iron-ore supplies from Brazil's Cia. Vale do Rio Doce as part of a pricing standoff.
The index tracking transport costs on international trade routes retreated 417 points, or 10 percent, to 3,746 points, according to the Baltic Exchange in London. The measure has fallen 45 percent this month to its lowest since August 2006.

Source: Bloomberg