* Australian coal prices up more than 50 pct this year
* Asian LNG prices remain low as supplies soar
* Coal still more cost effective for Asian power generators
* Coal would have to rise to $100/mt for LNG to compete
By Henning Gloystein and Mark Tay
SINGAPORE, Sept 22 Natural gas producers have
long yearned for a price spike in coal that would allow them to
compete in Asian power generation.
Yet even a 50 percent jump in thermal coal prices this year
has not been enough for liquefied natural gas (LNG) to gain an
advantage over its dirtier fossil-fuel cousin.
The use of natural gas - when not supported by government
policies - has typically been hampered in countries such as
China, Indonesia and Vietnam by cheap coal as they seek the
cheapest means possible to energize their emerging economies.
This year, things started to look different: an ongoing
slump in oil and gas coincided with coal prices surging to
nearly $75 per tonne from $49 in January, leading many to
believe there would finally be a chance for gas to compete.
But even with Goldman Sachs calling coal one of this year's
"hottest commodities", and LNG prices not that far above a
multi-year low of $4 per million British thermal units (mmBtu)
touched in April, gas has not become competitive.
"I don't think (the coal price gains) are large enough to
incentivise people to switch from coal to LNG, especially in
Asia," said Mangesh Patankar, Asia-Pacific head of business
development for energy advisory Galway Group.
"We need to see LNG prices falling further or coal prices
rising further for that change to actually take place," Patankar
told Reuters on the sidelines of an industry event in Singapore.
Asian spot LNG prices LNG-AS have fallen to less than $6
per mmBtu, from $20 per mmBtu in early 2014, even as coal
markets have soared.
Asian benchmark coal prices have risen this
year to $73.60 per tonne, the highest since March 2015, driven
by mining capacity limits in China that resulted in a surge in
Reuters calculations show coal would need to rise to $100
per tonne, or LNG to fall by another third, for the two main
fossil fuels for power generation to achieve price parity.
Despite more LNG capacity coming online over the next few
years, especially from Australia and the United States, Patankar
said LNG would continue to struggle versus coal on a cost basis.
"It looks hard at this stage that on a long-run marginal
cost level, an LNG-fired power plant can be cheaper than a
coal-fired power plant," he said.
That's because coal prices are also likely to remain low.
"We don't see spot (coal) prices going higher from here as
the Chinese government starts to loosen its existing production
controls," Australian bank Macquarie said this week.
China this week loosened its recently introduced caps on
domestic mining activity, leading many traders and analysts to
expect a halt in the coal's recent price rally.
(Reporting by Henning Gloystein and Mark Tay; Editing by Tom