The Missing Someone

Is Thermal Coal The New Oil?

ubs: is coal the new oil? given the apparent energy variance between coal and crude, and providing championing that inefficiency, the spot price of coal has the quiescent to rise upto $ 160 per tonne against 2008 supply contracts of $ 125 per tonne. a near 30 per cent upside hereon. while investors live under the impression that coal prices will drop over 2009-2012, the chances are that supplies from new mines in australia and indonesia will be dedicated to indian thermal power plants where close to $ 100 bn will be spent over with the next 5 years. indian investors potency do well to pick out the listed coal miners in the country and build long term positions in those stocks, in anticipation of a wonderful-pierce in crude prices. this is of significance because while lubricator reserves globally will not stretch beyond 25 years, coal would and most thermal plants globally would then be striving for coal which too would be diminishing being a finite asset for blue planet. we go on to view the thermal coal market has having some of the strongest fundamentals in the commodities space. enquire in the developing countries remains barest strong and inelastic. supply on the other hand has been hobbled by infrastructure constraints, weather problems and strong domestic demand from exporter nations resulting in a significant deceleration and in some cases contraction in export levels. 2008 contracts were recently settled at us$125/t; we believe that there is upside risk to our 2009e contract prognosticate of us$125/t. spot prices for thermal coal in both the australian and south african markets have been exceptionally volatile over the past cantonment, foremost many utility analysts around the global to rush back to their models. following the chinese power crisis in february which pushed newcastle coal prices over us$140/t, the inside government moved to prioritise shipments of thermal coal from minesite to the coastal utilities. the rebuild of inventories was very instant (more so than what we were expecting) and this resulted in some slothful entering into the market. consequently nwc prices demolish back to the us$120/t level. 2008 contract settled at us$125/t xstrata settled 2008 contracts at us$125/t; this was pretty much in-line with our forecast of us$130/t. we also believe rio tinto may have settled at this level. we currently anticipate contract pricing for 2009 at us$125/t; however we assume trust to that there may be upside risk to this foretell given continued supply-side problems globally, but specifically we believe that the chinese power issues which emerged early this year was in fact a consequence of a chronic infrastructure bottleneck rather than solely a function of adverse winter weather. availability to remain poor over the long-term in 2007 the important to be decided disagree for the thermal coal deal in was the mutation of china, from its position as a once significant exporter of thermal coal into the seaborne market to one where the country was a net import. this inflection point, combined with a informative deceleration of indonesian export nurturing, from an estimated 36% in 2006 to roughly 10% in 2007 in reckoning to a deceleration in vietnamese export growth from 76% in 2006 to 10% in 2007 resulted in the emergence of substantial tightness in the seaborne thermal coal market. coal stocks in china falling again? according to interfax coal stockpiles in china have ?plummeted? from march?s direct; and some power plants are facing limited supplies. the serc indicated at a latest compel conference that total coal stockpiled in passkey power plants dropped to about 47mt at 20 april from 53mt at the beginning of pace.

Slammiversary 2008