POLL-Asia thermal coal price to set new record in '08

By Fayen Wong

SYDNEY, Sept 19 (Reuters) - Contract prices for thermal
coal between Australian producers and Japanese utilities are
seen rising by more than 15 percent in 2008, due to reduced
Chinese supplies and Australia's port constraints, a Reuters
poll showed.

Prices for Asian thermal coal may jump to a record high of
$64 a tonne in the 2008 Japanese fiscal year, versus this
year's agreed price of $55.65, the median forecast of 10
analysts found. Estimates ranged from $59 to $70 a tonne.

China's continued withdrawal from the export market,
Australia's ongoing port and rail constraints as well as
sporadic supply disruptions in Indonesia due to wet weather are
expected to lead to a supply shortage next year, analysts said.

Red-hot Asian demand, which analysts have forecast to grow
about 4 percent in 2008 compared with 3 percent this year, will
also underpin the surge in prices.

As key producers Indonesia and Australia struggle to match
booming demand, analysts said coal supplies would significantly
tighten next year. They have forecast supply deficits to range
between 10 million and 33 million tonnes, compared with an
estimated shortfall of 8-10 million tonnes in 2007.

"The fact that coal remains the cheapest source of energy
compared to other forms implies that the shift towards coal in
the total energy mix seen in the past few years will continue,"
said Trina Chen, a commodities analyst at Credit Suisse.

CHINA, INDIA

Coal supplies from China are expected to halve to about
26.6 million tonnes in 2008 and drop to a low of 4.7 million
tonnes in 2010, Merrill Lynch's analysts Vicky Binns and Tom
Price said in a Sept. 5 report.

So far this year China, the world's top coal producer and
consumer, has emerged as a net importer of the fuel for the
first time ever, helping to push up spot prices in Asia to a
record-high of over $72 a tonne in August.

Binns said China's net thermal coal imports were expected
to rise to 18.4 million tonnes next year and 38.7 million
tonnes in 2009, as mines from traditional exporting regions
near the coast continue to underperform and inland producers
prefer to sell coal to domestic customers.

Demand from India, which has planned to add 50-100
gigawatts of coal-fired power plants to fuel its rapid economic
expansion, will further strain supplies.

Indian utilities, such as Reliance Energy RLEN.BO and
Tata Power (TTPW.BO), have begun to import more Indonesian coal
to improve the quality of coal burnt and reduce pollution.
Cement and steel industries have also increased imports.

The move could push India to import as much as 54 million
tonnes of thermal coal in 2008, against an estimated 28 million
tonnes this year, analysts said.

Exports from Australia, the world's second-largest thermal
coal exporter, will also see limited gains as miners continue
to be dogged by infrastructure constraints.

Analysts said recent 2008 contract price settlement between
South Korean utilities and miner Peabody Energy Corp (BTU.N) at
$65.50 a tonne would also be used as a benchmark.

"We believe the major Australian coal suppliers have
already established a floor price of around $66-$68 a tonne for
next year's contract with Japanese utilities," Goldman Sachs'
analysts Malcolm Southwood and Paul Gray said in a research
note.

Australian miners, such Xstrata Coal (XTA.L) and Rio Tinto
Ltd (RIO.AX)(RIO.L) have also kicked off talks with Japanese
utilities for 2008 contracts, which will begin from next month,
seeking as much as $70 a tonne.

Forecasts for Asia contract price for thermal coal in '08

Estimates Percentage change

2008* vs 2007

JP Morgan 59.00 6.0

National Australia Bank 61.20 10.0

Deutsche Bank 61.60 10.7

Wilson HTM 62.50 12.3

Macquarie Bank 63.00 13.2

Merrill Lynch 65.00 16.8

Citigroup 67.00 20.4

Goldman Sachs JBWere 68.00 22.2

Credit Suisse 70.00 26.0

UBS Bank 70.00 26.0
------------------------------------------------------

Median 64.00 15.00

High 70.00 26.0

Low 59.00 6.0

* Prices are in US dollars