Coking coal prices may rise 50 percent more than forecast next year on rising steel production and slow output growth from mines in Australia and Canada, according to UBS AG.
The price of hard coking coal, used to make steel, may increase to $300 a metric ton for the Japanese financial year beginning April 1, 2009, UBS said yesterday in a report by analysts led by Glyn Lawcock. The previous forecast was $200 a ton. Estimates for thermal coal used in power generation rose 28 percent to $160 a ton.
Slow supply growth, following floods at mines in Australia's Queensland state earlier in the year, may leave the global coking coal market about 6 million tons short next year, Lawcock said.
While China can generally meet the needs of its growing steel industry, any risks to the thermal coal supply may limit rail capacity for other cargo, cutting coking coal exports and increasing imports by coastal steelmakers, he said. ``This could potentially push balances into a greater deficit than currently envisaged,'' Lawcock said.
Storms in China in February boosted demand for thermal coal and exposed bottlenecks in the nation's rail network for delivery the fuel. Thermal coal was given priority over other freight.
After a brief recovery, coal inventories at Chinese power stations are again declining and may tighten supply this summer, Lawcock said. At the same time, supplies from Vietnam are capped, exports from South Africa are contracting, and port and rail bottlenecks in Australia are also capping deliveries, he said.
Source: Bloomberg
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