November 21, 2008

Merrill Lynch revises forecast for thermal and coking coal

Merrill Lynch has raised its forecasts for contract prices of coal for power plants and steel mills in 2008, predicting that prices will jump by as much as 200%, after recent supply disruptions resulted in a severe global shortage.

Merrill Lynch in a research note released on weekend said that “Contract prices for coking coal are expected to reach a record high of USD 300 a tonne, a 3 fold rise from an agreed price of USD 98 last year, amid a supply apocalypse following recent weather-related supply disruptions in Australia. And Japanese utilities may need to pay miners in Australia USD 135 a tonne for coal contracts in fiscal 2008 beginning April up by 143% from last year's agreed USD 55.65.”

Merrill Lynch in a report led by Mr Vicky Binns said that “There is now an obvious scramble for supply with industry sources confirming that Asian steel mills are begging for tonnes at close to any cost. Under current market conditions, spot prices reflect the hysteria of the supply shortage and therefore spot appears a reasonable guide for contract settlement."

Merrill Lynch had previously forecast 2008 thermal coal prices at USD 80 tonne.