Goldman Sachs JBWere Pty., the Australian affiliate of the world's largest securities firm, raised its contract coking coal price forecasts 17 percent, pacing higher cash prices for the steelmaking ingredient from India.

The annual contract price of coking coal may rise to a record $140 a metric ton in the 12 months from April 1, from $98 this year, the brokerage said. It had forecast $120 a ton.

Port and rail congestion in Australia, the world's largest exporter of coal, have restricted supply as Asian demand surges. BHP Billiton Ltd., the world's largest mining company, and rivals start talks with Japanese and Chinese steelmakers to set annual contract prices for coking coal and iron ore this month.

``We believe Australian coal suppliers are extremely well positioned to secure significantly higher contract prices,'' Goldman analysts Malcolm Southwood and Paul Gray said in an Oct. 19 report. There was ``no quick fix in sight for the severe congestion afflicting Australian coal supply chains and no let up in demand,'' they said.

Australian exporters recently sold coal to Indian buyers on the spot market at $165 a ton, Goldman said in the report.

BHP's Chief Executive Officer Marius Kloppers said last week that he hadn't seen iron ore and coking coal in shorter supply. The Melbourne-based company increased sales to India by 56 percent in the six months ended June from a year ago, selling coking coal and metals.

Power Stations

Energy, or thermal coal, used in power stations, may rise 35 percent to $75 a ton in 2008, from $56 a ton this year, Goldman said. The broker had forecast a price of $68 a ton.

Heavy rainfall in Indonesia, the world's largest exporter of energy coal, and port and rail congestion in Australia both curbed supply, the broker said. Asian power stations may engage in ``panic buying'', and send the cash market for thermal coal to $80 a ton, Goldman said.

The effect of forecast higher coal prices on the earnings of BHP and rival Rio Tinto Group will be more than offset by the rising Australian dollar, Goldman said. A stronger Australian dollar, boosting costs for BHP and Rio's Australian mines, will more than erode the price gains, it said.

The broker cut its 2008 earnings forecasts for BHP and London-based Rio by 2 percent and 3.9 percent respectively.

The Australian dollar has gained 12 percent this year, and touched its highest since 1984 last week.

Goldman Sachs also forecast that the contract price for semi- soft coking coal will rise 33 percent to $85 a ton, and the price for pulverized coal will rise 41 percent to $95 a ton.