Monday February 11, 2008, 5:47 pm By Fayen WongSYDNEY, Feb 11...

Monday February 11, 2008, 5:47 pm


By Fayen Wong

SYDNEY, Feb 11 (Reuters) - Thermal coal prices were near record levels of about $125 a tonne at Australia's Newcastle port, a benchmark for Asia, amid lingering disruptions in key mining regions.

Thermal coal, used in power generation and also to make cement, has sold for more than $120 a tonne since the start of February, underpinned by China's announcement it would stop exporting coal until April. The move is aimed at alleviating a supply crunch that was causing power shortages.

Some producers think prices could go higher as Chinese demand for power intensifies as much of the country returns to work after a week or so off for the Chinese New Year holiday.

Thermal coal prices rose $9.04 from a week earlier to $125.48 per tonne, globalCOAL's NEWC weekly index showed in the week ended Feb. 8, based on free-on-board (FOB) prices loaded at Newcastle port.

GETTING WORSE

"The shortage will get worse after the Chinese New Year break because factories will re-open after closing for about one or two weeks and that will increase demand for electricity," said a marketing manager of a major Indonesian coal producer, who declined to be identified because of company policies against speaking to the media.

"That means Chinese buyers will be looking for more coal in the market."

Despite China's two-month export halt to keep more coal supplies at home, utilities in the south continued to scour overseas markets for coal, producers and traders from Australia and Indonesia said.

"China is not just keeping more supplies at home, they are also soaking up more supplies in the international market," said an independent coal trader based in Singapore.

The number of freighters lined up at Australia's Newcastle port for loading has jumped to 41 from around 25 all of last month, port data showed.

Analysts said the price gains might be reversed once big suppliers turn up production now that the bad weather that plagued operations last month had passed.

"South African, Chinese and Australian supply is quickly getting back on its feet," said Mark Pervan, a senior resource analyst at Australia & New Zealand (ANZ) Bank.

He noted that Rio Tinto's (ASX: RIO.ax) RIO.L coal mines in Queensland, Australia were at full production again, coal stocks at major power plants in southern China had replenished stockpiles to 10 days of supply and coal reserves at South African utility Eskom [ESCJ.UL] had swelled to 5 days of supply from 3 days.

Coal prices have risen 37 percent so far this year. (Editing by James Regan)