Fukushima Nuclear Crisis and Australian Flood Impact on Coal Price

"Coal price could hit $US500 a tonne after the floods, analysts warn", by Sarah-Jane Tasker, The Australian, January 17, 2011

Similar analysis came up immediately after the earthquake and tsunami that recently struck Japan. The subsequent Fukushima nuclear crisis comes to reinforce the bullish thesis.

Moderation is now a key word in latest analyst consensus.

Prices range now around $US125, after a short increase, up to $US135. The trend is rather likely to show a slight drop in price for the coming months.

The Australian flood impact on coal mining is huge, tightening the market. The earthquake and tsunami severally damaged Japanese main coal import terminal and thermal power plants. Economic activity slows and steel-thirsty car manufacturing industry suspends production. Temperature rising in the Northern Hemisphere also brings a seasonal factor in favor of a price drop.

The situation in Japan will improve. And Japan is the world's largest importer of thermal coal. Economy will restart. We all hope that will happen at the earliest. But who can be more precise?

Australian flood impact on the middle term supply of coal market remains uncertain. But due to the relative weight of Australian coal on the global market, prices will certainly be pushed up. $US140? $US170? Nobody really knows.

Nevertheless, there is a persistent rumor of a coming Coal Price Boom. Of a big boom. And the traders call the mining consultants. What do you think? $US400? 500, maybe? Sarah-Jane Tasker's price levels are back on stage.

The Coal Price Boomers have a massive argument: they predict a major shift away from nuclear power, at least in Europe and in the US, under the pressure of environmental NGO's.

I personally find it hard to believe that the green parties will join the anti-nuclear groups to promote coal usage!

The Coal Price Boom thesis also willingly ignores all the other sources of energy that could be alternative to a potential lack of energy due to a potential future partial shift away from nuclear power. Natural gas is one. Renewable energies are also definitely part of the equation.

• Shall we expect higher prices for the energy in the future, whatever the source?

Definitely yes. Nothing new under the sun, I am afraid.

• Are the Fukushima Nuclear Crisis and the Australian Flood going to provoke a coal price boom?

My answer is no. But I am not a trader.