Reduced global steelmaking in 2009 will cut demand, push supply into surplus and halve the price of coking coal, forecast analysts Alan Heap and Alex Tonka at Citigroup Global Markets. They forecast that global steel production will fall 4.2% next
Under such a scenario, Heap and Tonka expect coking coal prices to fall 50% to an annual average $150/metric ton next year. “Spot prices had gone to the moon, to record levels, before the financial meltdown,” says Jim Thompson, editor of Coal & Energy Price Report, an industry newsletter, who expects 2009 prices to settle around $200.
Spot prices for metallurgical coking coal used to make steel increased as high as $300/metric ton throughout Asia in the first half of 2008 (depending on supplier and buyer), up from an average $120 in 2007. The price was due to strong
Steelmakers in China already have begun lobbying for
Heap and Tonka add that “this cycle has seen an unprecedented level of steel production cuts,” so the Citigroup analysts believe that continuing curtailments in production are likely to result in delays to price settlements. “Neither producers nor consumers see it in their interest to settle annual prices in such a turbulent market,” Heap and Tonka write.