Export coal price set to rise about 30pc

Overseas contract prices for Solid Energy coal and coke are likely to rise by up to 30 per cent as China looks to cut its own coal exports.

But the state-owned enterprise says it does not expect to make much money from the impending increase in prices, once the sales made in United States dollars are converted to New Zealand currency.

Some Australian coal exporters are predicting a boom for their industry, as Japanese power companies are close to accepting a 40 per cent rise in the price of thermal coal, and steel mills in the same country negotiate for 20 per cent more expensive coking coal.

China is tipped to reduce its coal exports this year from about 90 million tonnes to 80 million tonnes, using the extra coal to fuel its own growth. Such a move has Japan nervous about its security of supply.

In New Zealand, Solid Energy international marketing manager Simon Doig said the company's overseas contract prices for hard coking coal would rise by 20 to 25 per cent. For its thermal coal, the most likely scenario was it would increase in price by 25 to 30 per cent.

Sixty per cent of the approximately 2.3 million tonnes of Solid Energy coal and coke exported annually currently goes to Asia, mostly to China and Japan.

The higher prices for hard coking coal, which can now be bought from Australia for around US$55 to US$56 ($81.88 to $83.32) a tonne, had been negotiated during the past few weeks and would take effect in April, Mr Doig said.

The contract price had yet to be settled for thermal coal, with Australian prices currently sitting at around $US35 to US$40 a tonne, but was expected to be finalised within the next couple of months.

Mr Doig was not prepared to release actual Solid Energy prices for either category because of commercial sensitivity.

"There's been very, very strong demand for thermal coal, driven by the demand coming out of China. The Chinese are keeping coal within their market rather than exporting.

"All the [higher] prices are doing is making it more feasible to export coal. Three to four months ago it was very difficult to do that. When we convert these back to New Zealand dollars, we'll still be a little bit behind," he said.

In Australia, an industry source told Reuters the global spot price for thermal coal had hit US$40 a tonne last week compared with US$22 a year ago.

Before Christmas, Solid Energy chief executive Dr Don Elder said it would be a "very, very difficult year for us" if exporters could not negotiate increases of between 15 and 25 per cent.

He said increases of less than 15 per cent, would harm Solid Energy's growth.

- NZPA