Friday, February 12, 2010

Coal Price Forecast 2010-2011

Analysts mostly expect a rise in coal prices in 2010 and 2011, especially metallurgical (coking) coal, citing recovery in the global economy and tight supply.

Coal Prices may Head Up
  • UBS analyst Henry Kirn and Citi Investment Research analyst Brian Yu both expect higher coal prices in 2010 and 2011.
  • Yu expects prices for coking coal will settle at $200/ton in 2010 and 2011, up from earlier forecasts of $140/ton. Latest available data from the Energy Information Administration (EIA) has coking coal selling for $137/ton.

World coal price expected to increase

  • Analysts at Macquarie Bank expects an average world seaborne coal spot-price increase of 15% this year to $82.50/metric ton from $71.75 in 2009 while Merrill Lynch forecasts a 20% hike to $86.
  • Neither forecaster sees prices spiking back to the $127 level of 2008.
  • Macquarie analyst Carol Cao says in a research note that the recent 30% spot coal price surge to $100/metric ton "has been largely due to weather issues," and she expects to see lower spot prices at the end of winter. Still, winter costs are rising; Macquarie says internal Russian coal transport costs have risen to $75/metric ton to ports in both the Baltic and the Pacific, which will cause winter export prices to rise soon.
  • With the world coal price increase, the risk of a new resources tax and slim chances for a tariff hike in the first half of 2010, Merrill Lynch analysts also think Chinese independent power producers will face a "material margin squeeze" at least in the winter of 2010.
  • Fitch Ratings expects only a "modest increase" in domestic steam coal prices in the second half of 2010 from the $53 average of 2009 on partial recovery in domestic industrial power demand and less gas for coal substitution.
World coking coal prices seen rising
  • Scotiabank economists predict that the cost of coking coal will increase by 31% this year to $169/metric ton in benchmark Asian markets from an average $129 in 2009.
  • J.P. Morgan Securities is slightly less bullish, projecting 24% inflation to $160/metric ton.