Power-Station Coal Prices May Decline, McCloskey Says (Angela Macdonald-Smith)

Nov. 6 (Bloomberg) -- Prices for power-station coal may fall further because of potential oversupply and as the market returns to being driven by demand, currency and cost factors rather than by speculative investors, The McCloskey Group said.

Record prices earlier this year were driven by "speculative play by the banks and hedge funds" rather than by fundamentals, which are "weak," Gerard McCloskey, founder of the consulting firm, said today in a presentation to a conference in Sydney. Demand growth this year is set to be the lowest on record, he said.

Prices for thermal coal exported from Australia's Newcastle port, the world's biggest export harbor for the fuel, were at $100.83 a metric ton in the week ended Oct. 31, down from a record $194.79 in July, according to the globalCOAL NEWC Index. The International Monetary Fund predicts the world's advanced economies will grow next year at the slowest pace since 1982.

Growth next year in demand for power-station coal in both the Atlantic and Asian regions may be "slight," McCloskey said in the presentation. South African exports to India may increase, while Russia may ship more from the Pacific coast to Asia and export capacity may increase in Australia, he said.

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