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Coal use points to growth

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Rob Griffith / AP / File

(Read caption) A ribbon of oil snakes away on the surface from the Chinese-registered 230m-long bulk coal carrier Shen Neng 1, off the coast of Rockhampton, Australia, Monday, April 5, 2010 . Since the floods in Queensland, Australia's coal production has dropped 15 percent.

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International coal prices hit $124 per ton this week, the highest levels in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia has made coal supply tight. The floods in Queensland, Australia cut the country’s output of coal by 15 percent and other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.

At the end of March 31, coal prices were 33 percent higher than a year ago and earlier this month, mining giant Xstrata inked a one-year deal with a Japanese utility at $130 per ton, effectively setting a floor under coal prices in the near-term. That’s up from $98 per ton the company made in a similar deal a year ago.

Perhaps no country is more affected by this development than China. With its economy powering ahead with 9.7 percent GDP growth during the first quarter, Chinese electricity use was up 13.4 percent on a year-over-year basis over the same time period, according to China’s National Energy Association (NEA). China’s overall electricity consumption is now expected to rise 12 percent this year, up from the 9 percent growth the NEA forecasted in January.

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