When boats are queuing at ports to load up with a particular cargo, you know that the goods that they are waiting for are precious and in demand.

Well, this is exactly what is happening in Newcastle with what is turning out to be a very precious cargo indeed... and it’s one that I believe is going to get even more precious in 2008.

By Newcastle, I am not referring to the rain-soaked home of the winter miniskirt and Toon Army… I mean the much sunnier Newcastle that is on the other side of the world; the one in Queensland, Australia.

Newcastle Port is the world's largest export harbour for coal – and ships are queuing at the harbour mouth to get in and load up. Demand is such that the infrastructure is struggling to cope. This is limiting shipments and contributing to a rise in the price of the fuel worldwide.

Power station coal for delivery within the next three months climbed for a third week, by $1.43 to $83.51 a metric ton in the week ended 9 November, according to the globalCOAL NEWC Index. I think this trend is set to continue.

“The port bottlenecks in Australia are a big factor; we don't seem to quite get the supply side sorted out,'” said Clyde Henderson, a Sydney-based coal analyst at Barlow Jonker in an interview with Bloomberg.

Ships waiting to load rose for a third week… Forty-two vessels were queuing off the port in the week to Monday 12 November, an increase of two when compared with last week. The queue hasn’t been less than 37 ships in any week of this calendar year.

Coal more attractive than oil

I have written about the bullish prospects for coal in this column a number of times in the last few months. Coal is regarded as a bit of an environmental bogeyman, a dirty source of energy. However, it has one big benefit – it is relatively cheap. With oil prices on the rise, it looks more and more attractive as a source of energy.

You may recall on Monday that I mentioned that the Paris-based International Energy Agency in its World Energy Outlook 2007 said that the fuel source that will show the most rapid growth between now and 2030 was coal.

Even the US government agrees. The Energy Information Administration has down some number crunching on the issue. In its 2007 International Energy Outlook, the US government body predicted that total coal consumption would rise 74% between 2004-2030, with the international coal trade rising 44% between 2005 and 2030. In its base case, the organisations’ analysts predicted that coal’s share of world energy consumption would increase to 28% in 2030, from 26% now.

This rise in demand is happening now. Asian countries have a massive demand for coal and the main beneficiary of this appears to be Australia. The country is already the largest exporter to the world of coking coal and steam coal and it seems almost certain that the country will expand their share of international trade.

Because of the increasing demand, UBS recently upgraded its coal price forecasts for hard coking (HCC) and Pulverised Coal Injection (PCI) grade coal from 1 April 2008 and beyond.

The Swiss broker is now forecasting an April 2008 HCC price of $130/t, up from $115/t previously. Its April '09 estimate is now $110/t compared with $100/t previously. I believe the risk to these forecasts is on the upside.

Coal still accounts for 25% of energy consumption worldwide, beating natural gas which supplies 22% of global energy needs. Despite its “dirty” nature, coal really is here to stay – and there’s plenty of profit to be made.

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