Coal cost soars in supply ‘apocalypse’

FLOODING in Queensland’s Bowen Basin has resulted in a “supply apocalypse” for coking coal, with contract prices likely to hit $US300 per tonne – three times the price in 2007 – as steel mills scramble for the key ingredient.

Investment firm Merrill Lynch estimates flooding in the Bowen Basin has taken about 15 million tonnes of coking coal out of the market, as infrastructure limitations restricts the ability of producers to make up the lost output.


“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,” Merrill Lynch said in a client note today.

“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 expects “peak coking coal prices” for the 2008 Japanese financial year, starting April 1, with a forecast premium hard coking coal price of $US300 per tonne.

Daily Telegraph