deutsche bank hot on thermal coal

Material Matters: QE2, Base Metals, Thermal Coal
By Money
Tuesday, 16 November 2010
By Chris Shaw
...
Turning to the thermal coal market, Deutsche Bank notes prices here have also been strong in the past month, rising by around 13%. In the broker's view, the gains reflect restocking ahead of the northern winter.

Such seasonal buying is generally significant, Deutsche Bank noting Chinese thermal coal demand from power plants has risen by an average of 16% in December when compared to the annual average. This year the trend has been exacerbated by fears the coming winter could be a particularly cold one.

This year is a La Nina year, which supports the concerns of an unusually cold winter, so Chinese power plants have also been buying as a precautionary measure. The view of Deutsche Bank is the weather factor could potentially make thermal coal the best performer of the bulk commodities in 2011, as demand from key regions such as India and China should remain resilient.

As well, Deutsche expects a continuation of infrastructure issues in China and constraints from key seaborne suppliers such as South Africa and Australia. From a forecast US$98 per tonne for the 2010 Japanese financial year (JFY), Deutsche expects prices for contract thermal coal will rise to US$110 per tonne in JFY 2011 and to US$120 per tonne in JFY 2012.

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