Coal prices predicted to rise dramatically
By Purchasing Staff -- Purchasing, 7/17/2008 6:00:00 AM
Shrinking supply and booming international demand is keeping the metallurgical coal market extremely tight, says analyst David Khani of Friedman, Billings, Ramsey in a recent report. Khani raised his price forecast for metallurgical coal, which is used in steel production, by a whopping 90% for 2009 to $130/ton and upped his price forecast 130% for 2010 to $250/ton.
The steam coal market in the U.S., Khani told the Associated Press, is also undersupplied as power generation demand accelerates the need for the commodity. He suggested that supplies will dwindle at the end of next year and prices should rise at a rapid rate.
At the recent Reuters Global Energy Summit in Houston, Arch Coal CEO Steve Leer said the coal shortage across the globe could last three years. “In 2008, we estimate we're 25 to 35 million tons short across the globe,” Leer told the summit, adding that he sees that virtually doubling by the end of 2009.
Reuters reports that in May, the brokerage Dahlman Rose, too, issued a bullish report on the coal sector, saying the global metallurgical and steam coal prices will be sustainable for some time.
Earlier in May, coal miner Massey Energy predicted coal prices will average $61-63/ton this year, up $8 from its prior forecast. Massey says coal prices will stay high enough to allow it to spend an extra $90 million on mining expansion this year, for a grand total of $310 million. Massey also boosted its 2009 forecast to $65-74/ton from $57-59 and jacked-up its 2010 outlook by up to 24%.
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