Coal's Perfect Storm Morphs into a Robust Price Trend

Source:

Although coking and thermal coal prices soared by 200% to 300% this year in response to a perfect storm of short-term events including Queensland, Australia, floods, coal export bans in China, and the South African energy crisis, Citigroup forecast Monday that coal prices will remain robust.

Although coking and thermal coal prices soared by 200% to 300% this year in response to a perfect storm of short-term events including Queensland, Australia, floods, coal export bans in China, and the South African energy crisis, Citigroup forecast Monday that coal prices will remain robust.

While the perfect storm has abated, Citigroup mining analysts Alan Heap and Alex Tonks, both based in Australia, suggest that "limited potential for new supply means the coking coal market is expected to remain tight for many years." Coking coal spot prices are around US$385.t, up $85 since January and above contract prices since 2000. Xstrata is believed to have recently settled at US$360/t for JFY 2008-2009, according to Citigroup.

Heap and Tonks assert that the supply-demand outlook points to persisting supply deficits of coking coal. "Further, it is difficult to identify additional supply sources which will meet the shortfall, even in response to higher prices," they said." The most likely response will be reduced steel production as mills run short of coal. Indian steel producers are the most vulnerable."

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe