new catalyst?, page-7

Chinas Coking Coal Shortage To Spur Demand Fight

Extraction - Mines China 12/24/2009

China, the worlds largest steelmaker, faces a shortage of coking coal that may drive imports next year and spur a fight for resources with Japanese and South Korean mills, two Chinese industry groups said, reported Bloomberg.

Domestic demand for coking coal will rise moderately next year, while global demand may gain faster, intensifying competition, said senior analysts.

Chinas coking coal imports rose 12-fold this year, boosting sales of BHP Billiton Ltd. as the government closed smaller, unsafe mines.

Prices may jump by between 23 percent and 38 percent in 2010, as global demand rebounds from the deepest recession since the 1930s, according to Macquarie Securities Group, JPMorgan Chase & Co. and Morgan Stanley.

Import demand by China may rise 5.6 percent to 38 million metric tons next year from an expected 36 million tons this year, Macquarie analysts said in a Dec. 15 report. Domestic coal prices in the nation may increase 14 percent next year, Citigroup Inc. said in a Dec. 4 report.

Japans purchases may jump 14 percent to 58 million tons, and South Koreas demand may rise 17 percent to 21 million tons next year, Macquarie said.

China produced 705.1 million tons of coking coal last year, according to Beijing Antaike Information Development Co.

Congestion on railways is also boosting imports by steelmakers which have furnaces near ports, said Mysteels Zhang.

These mills may get 20,000 tons to 30,000 tons of coal monthly by railway, she said. A ship can carry 70,000 tons, and take just half a month from Australia to China, she said.

Benchmark contract prices may surge to $180 a ton from $129 a ton, Macquarie forecast. JPMorgan and Morgan Stanley expect prices to jump to $160 a ton.