London: Coal prices may have much higher to go this year on Germany's nuclear rethink and the Japan crisis, despite having dipped after the first shock reactions across energy markets.
Analysts polled by Reuters already predicted steady gains this year, but a pull back due to a seasonal demand dip and a surge of liquified gas (LNG) exports to Europe is likely to only prefigure sharper gains than expected later.
Coal accounts for 40 per cent of world electricity generation, according to the International Energy Agency, and will bear much of the burden of any loss of nuclear's 14 per cent stake.
Coal prices have seen sharp intra-day spikes since December in response to floods in Australia, Japan's disaster and Germany's decision to shut 7 megawatts of nuclear power, pushing Australian prices close to $135 (Dh495.77) a tonne and DES ARA Europe prices to around $130. But after each rise, they have returned to around $125 a tonne. A Reuters poll in February predicted average 2011 European ARA prices of $121.
Too many variables
Even so, traders, utilities and producers advise against shorting the price of coal. They say there are too many variables — from the speed of Japan's rebuilding, Australian exports' full recovery, moves in the dollar and oil price spikes on Middle East unrest.
On Friday, Xstrata agreed term contract prices with Japan's Chugoku at around $130 a tonne for 2011, a record level that surprised the market — traders had expected a price $10 or so lower. That tipped market sentiment into cautious bullishness.
Privately, many producers, traders and analysts have said that a rise to $130 to $140 per tonne now looks possible in the second half.
