Declining coal reserves add to energy supply worries

In mid-2000, Australian thermal coal bound for the Asian market — mostly China — was selling for $24.59 a tonne. Last week, it broke $116.

Some analysts speculate the price in 2008 might exceed $200. In the Indian business press, there was concern that since China became a net importer of metallurgical coal in 2007, the cost inflation for a tonne of steel had reached $90. Even melting down scrap from dismantled ships is getting expensive.


So, thinking about a new bicycle? You might consider buying it now. Common sense suggests prices will increase as competitive demand bids up coal prices which in turn boost primary manufacturing costs which will be inflated by freight costs that are already coupled to accelerating oil prices.

With coal prices setting records, you’d reasonably expect a stampede to find and develop new reserves, a pattern with which British Columb-ians are familiar. Every time metal prices get a good bounce, the mining industry goes into overdrive. And any sustained jump in petroleum prices triggers renewed exploration in the oil patch.

But with coal, it appears that as prices go up, proven reserves go down.

Vancouver
Sun