Following a decline last year, a substantial increase in metallurgical coal contract prices is expected for the coming financial year because of strong global demand for coal. What’s more, steel is forecast to enter a phase of intense demand, further supporting coal demand.
Stuart Burns for Ag Metal Miner reports on the strong factors driving the growth of these commodities:
- World metallurgical coal demand is strong, driven mainly by expanding steel industries in China and India. Iron ore prices are expected to rise substantially as well. [Why China’s Buying Spree is Moving Commodity Markets.]
- China remains the main driver of growth in world steel production and is expected to account for around 70% of the increase in world steel output this year.
- With the introduction of an iron ore export duty by the Indian government and a significant depreciation of the U.S. dollar over the past year, prices are poised up to skyrocket. [Coal Leads Energy Sector Charge.]
- Beijing’s shift to a net importer follows a clampdown on illegal and unsafe mining operations, but has enabled the Australian miners to keep the market tight as demand has dropped elsewhere.
Iron ore or coking coal prices are not expected to come down from their levels now. A fall in the raw materials sectors would only be attributed to a sudden drop in Asian demand and production.
For more stories about commodities, visit our commodity ETF category.
- Market Vectors Steel (NYSEArca: SLX)
- Market Vectors Coal (NYSEArca: KOL)
- PowerShares Global Coal (NASDAQ: PKOL)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.