Coking coal prices to zoom on China imports
International coking coal prices will rise sharply over the next two years, as China steps up its imports to meet a growing shortage. CRISIL Research expects coking coal prices to increase by more than 50 per cent from the 2009 average of USD150 per tonne, to USD230-240 per tonne in 2010, and further to USD270-280 per tonne in 2011.
China, which accounts for almost half the world's coking coal consumption, will face an increasing shortage over the next two years. Since early 2009, the Chinese government has been closing illegal coal mines for safety reasons. This has affected coking coal production in China, with production dropping marginally to around 380 million tonnes in 2009 from 387 million tonnes in 2008. As a result, from a position of self sufficiency in 2008, China imported 30 million tonnes in 2009.
China's requirement of coking coal will increase by around 8 per cent annually, double the likely production increase of 4 per cent annually. CRISIL Research therefore expects China's imports to grow rapidly, to about 50 million tonnes in 2010, and further to 70 million tonnes in 2011. These imports would account for 23-25 per cent of the world's coking coal trade in 2011, up from about 14 per cent in 2009.
International coking coal prices have already increased by 35 per cent since October 2009, to USD230 per tonne in May 2010. “We do not see the strong run for prices ending here”, explains Sudhir Nair, Head, CRISIL Research. “The structural shift in China's position, and its emergence as a significant importer of coking coal, will push up prices further, and we believe that the 2011 average could easily be of the order of USD280 per tonne.”
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