Coal exporters seen adding 15 pct supply by 2014 -Barclays

LONDON Fri Dec 21, 2012 8:23am EST

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LONDON Dec 21 (Reuters) - Coal exporting countries will likely boost supplies by 15 percent over the next two years on strong Indian demand and despite lower imports in Europe and China, Barclays said on Friday.

The bank expects global coal producers to expand their export capacity by about 136 million tonnes, a 15 percent increase on 2012 trade.

"Looking ahead to 2013 and 2014, the supply side continues to look buoyant with investments coming to fruition in many of the major exporting countries and thereby increasing export capacity," Barclays energy analyst Trevor Sikorski said in a research note.

The global supply of coal grew by 10.5 percent in 2012, he said.

India is expected to raise coal imports at an annual growth rate of 18 million tonnes, primarily driven by the expansion of coal-fired power plants.

But demand will struggle to keep pace with supply as environmental regulations result in coal-fired power plant closures in Europe.

Demand from Europe and China is expected to fall after a rise in imports this year of 15 million and 40 million tonnes, respectively, Sikorski said.

In China, improved transportation infrastructure is expected to bolster the use of domestic coal, thereby reducing the need for imports.

Healthier Chinese hydroelectric reserves should further help temper coal demand.

Chinese coal imports are expected to stabilise next year before contracting by 35 million tonnes in 2014 to 100 million tonnes, Sikorski said.

Despite expected higher supply, Barclays sees coal prices gaining some $6-7 per tonne from current levels in 2013 chiefly due to higher expected oil prices, which it has forecast to rise by 14 percent year on year from $110 per barrel currently.

European physical spot coal prices dropped from around $130 a tonne at the beginning of 2011 to below $83 in October of this year, but prices have picked up to over $90 a tonne since.

Barclays expects coal price support levels to increase to $90-$95 per tonne in 2013 from $85-$90 per tonne on the CIF Amsterdam-Rotterdam-Antwerp contract currently, Barclays said.

Its average price outlook for 2013 is $95 per tonne for coal delivered to CIF ARA, $93 per tonne for South African coal and $92 per tonne for Australian coal.

"Without the cost price pressure from oil, these price forecasts would be some 6-7 $/t less given the expected pressure from supply," Sikorski said.

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