COAL & Allied is forecasting a weaker coal market in 2009 despite reporting a sevenfold surge in its profits for the previous year.
The mining company, which is majority owned by Rio Tinto, says it is bracing for big cuts to contract prices as thermal coal prices are likely to suffer in the coming months.
Thermal and coking coal prices have increased amid infrastructure constraints on the east coast of Australia and increased demand from China. But a cutback in demand due to the global economic crisis is putting pressure on commodity prices.
Recent coal contract settlements suggest a 30% fall in thermal coal prices — which is used to fuel power stations, while analysts expect a fall of more than 50% in coking coal prices - used in the steelmaking process.
Coal & Allied managing director, Bill Champion, says the company benefited from record thermal coal prices and a weaker dollar in 2008, but has warned of tougher market conditions ahead.
''We will see more subdued markets in 2009 with thermal coal prices likely to soften compared with 2008,'' Mr Champion said in a statement.
''As well, the premium for semi-soft coking coal over thermal prices also is likely to narrow.''
The company is expected to pare back coking coal sales in 2009, although volumes are yet to be decided, according to a spokesperson.
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