Amid all the gloom and doom ...

The Australian has run very very hard against the Rudd govt and especially on the RSPT.

But lodged away in the Business Section was this little gem.

It would have been excellent if it had been placed next to a story by Xstrata about abandoning projects ...

Thermal coal set to boom, says bank

Michael Bennet
The Australian
June 03, 2010 12:00AM

THERMAL coal could become Australia's next booming commodity, Deutsche Bank predicts.

The German investment bank's global thermal coal team expects thermal coal contract prices to rise 26 per cent to $US120 ($144) a tonne by 2012 because of a rise in net imports from China and India.

The forecast led to local analysts upgrading their earnings guidance yesterday for a swag of coal miners, including BHP Billiton and Rio Tinto, despite the threat posed by the controversial resource super-profits tax.

"The seaborne thermal coal market is experiencing a transformation which may be as significant as that which occurred for the iron ore market over the past decade," Deutsche Bank's report says.

"In a similar way, we believe China and India together could transform the demand landscape for thermal coal over the next decade, displacing current western importers and evolving to dominate the industry."

The Reserve Bank of Australia reiterated this week that despite the recent softening of commodity prices in the wake of Europe's debt crisis and a slowdown in China, Australia's terms of trade were likely to remain at high levels.

Deutsche Bank's report shows this year's thermal coal contract prices were higher than expected at about $US98 a tonne and the bank expected the "very supportive" fundamentals to continue into next year and 2012.

Thermal coal suppliers have not moved to quarterly pricing as iron ore producers have, which provided a more stable earnings outlook, Deutsche said.

NSW miners Whitehaven Coal and Centennial Coal are Deutsche's preferred thermal coal stocks, and yesterday analyst Brendan Fitzpatrick upgraded Whitehaven to a buy and lifted Centennial's earnings per share by up to 65 per cent in full-year 2012.

Analyst Paul Young also upgraded earnings of BHP and Rio by up to 5.5 per cent in 2012-13 because of the size of their thermal coal businesses relative to their other divisions.

"We believe the competition for capital with other divisions means BHP's energy coal growth pipeline is more limited than Xstrata and Anglo," he said.

Deutsche reiterated its buy rating on Rio and BHP and upgraded its price targets to $96.50 and $48, respectively.

Queensland's Macarthur Coal was upgraded to a hold.