PERTH - Coal prices for power generators at Australia, a benchmark for Asia, hovered near record levels of about $195 a ton over the past week, supported by expectations that Chinese coal exports would fall in the third quarter.

Several traders said coal prices were again propped up by expectations that China, the world’s largest producer and consumer of coal, would either significantly cut back its second-half export quotas, or not issue any at all, in a bid to keep more supplies at home ahead of the Olympic Games in August.

Thermal coal prices jumped $22.69 from a week earlier to $194.79 a ton, the globalCOAL’s NEWC weekly index showed in the week ended July 5, based on prices at Australia’s Newcastle port, the world’s largest coal export terminal.

"Prices are very strong because the market is generally expecting China to slash its second batch of export quotas," said a Singapore-based trader.

"And if they do, the Japanese, South Koreans and Taiwanese utilities will have to find alternative supplies. But there aren’t much extra supplies available anywhere."

Lower exports from China have increased the pressure on other Asia-Pacific producers in recent years, with Indonesia receiving the greatest benefit as it achieves higher prices while increasing volumes.

In contrast, coal exports from Australia, South Africa and Russia have remained constrained by infrastructure issues.

Russian coal producers said on Monday that exports from the country were likely to fall more sharply than expected, as Russia’s hydro power levels fall to their lowest in 16 years, forcing coal plans to run fully through summer.

Traders said new tenders issued in the Philippines and Taiwan last week also buoyed sentiment in the spot market, which has seen little buying for the past month.

Thermal coal prices have jumped over 200 percent from a year ago on powerful Asian demand and as supply outages in Australia, China and South Africa earlier this year exacerbated the market’s tightness.

Surging oil prices, which have jumped over 50 percent this year and struck a record high of near $145 a ton last week, were also supporting coal’s rise, analysts said.

Coal prices in Australia struck a record high of $201 a ton on July 2 but pulled back sharply in the following days, taking their lead from a 20 percent drop in European thermal coal prices, which traders and analysts said was due to a long-overdue market correction.

Still, analysts said Asian coal prices were expected to remain firm with all indicators pointing to tightness in the market.

"In a such a tight climate of supply and demand, there seems to be limited downside risk to coal prices," National Australia Bank’s commodities analyst Gerard Burg said in a report last week. – Reuters