BMO Predicts Tight Supplies Are Turning Met Coal into Black Gold

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Global Commodity Strategist Bart Melek and Associate Michael Zimerman expect metallurgical coal prices to average $305/t in 2008 and $300/t in 2009. "Upward pressures on prices are unlikely to abate until 2010, when infrastructure constraints are overcome."

BMO Capital Markets says coal contract prices will stay extremely strong this year and next with upward pressures on prices unlikely to abate until 2010 as infrastructure constraints are overcome.

Global Commodity Strategist Bart Melek and Associate Michael Zimerman expect metallurgical coal prices to average $305/t in 2008 and $300/t in 2009. "Upward pressures on prices are unlikely to abate until 2010, when infrastructure constraints are overcome."

However, BMO forecasts that long-term prices are forecast to trend down toward "a very $120/t nominal by 2013, which BMO calculates is the long-term marginal cost of production and level needed to generate the supply of seaborne coal to balance the physical market."

Met coal demand is being driven by steel consumption according to BMO. China met coal demand, which accounts for half of overall consumption and 70% of demand growth in recent years, is forecast to increase 66% by 2012...

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