by: Robin Bromby From: Dow Jones Newswires March 15, 2012 12:00AM
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COAL demand on the wane? Perhaps, but not for long.
Japan's steelmakers have negotiated new coking coal prices for the June quarter of $US206 a tonne, 12 per cent lower than in the March quarter and down 40 per cent on the same period last year.
So far as the thermal variety is concerned, this week's bad news is that the share of electricity generation from coal in the US is now at a 35-year low as utilities switch to much cheaper gas, leaving American miners free to lift exports and cause potential oversupply elsewhere.
But these are short-term considerations. If you follow what the big Asian customers are doing, they're searching for secure coal supplies for the years ahead -- which is why South Korea's SK Networks is paying a premium to control coking and steaming play Cockatoo Coal.
Also this week, Mitsui signed a deal to buy coal from the state-run eastern section of the Erdenes-Tavan Tolgoi mine in Mongolia, one of the world's largest deposits of coking coal, with a resource of six million tonnes.
Mongolia is seeking a foreign team to develop the western part. Mitsui, Itochu Corp, and the Russians, Chinese and South Koreans are all vying to be the chosen player.
Meanwhile, JX Nippon is paying $US435 million ($415m) for a 25 per cent stake in Xstrata's coking coal operations in Canada's Peace River coalfield.
And the Japan Bank for International Co-operation will lend Itochu $US620m to buy a 20 per cent stake in the La Loma and El Descanso mines in Colombia, now the world's fourth largest coal exporter.
Then there's India. This week the Mundra power station in Gujarat became the world's largest privately owned coal-fired power station, the commissioning of a fifth unit taking its generating capacity to 4620 megawatts (the whole Snowy Mountains scheme has capacity of 3800MW).
It simply depends on where the coal is originating...coal demand is though the roof BUT the origin is key....US producers are the hard luck story here, south Asian producers are the winners as demand is closer to supply there.