Getting into production by early 2010 would be perfect at a forecast price of ~$200/ton:
UBS analyst Henry Kirn and Citi Investment Research analystBrian Yu both expect higher coal prices in 2010 and 2011. They cite expectedimprovement in U.S.and Chinese demand for metallurgical (coking) coal used in steel production anddomestic demand for coal used in power generation.
Yu expects prices for coking coal -- used in making steel --to rise as global steel production rebounds and supply lags. Prices will likelysettle at $200 per ton in 2010 and 2011, up from earlier forecasts of $140 perton. Latest available data from the Energy Information Administration (EIA) hascoking coal selling for $137/ton, delivered, in the U.S. market.
Yu says demand for U.S. thermal coal-used mainly forheating and electricity-appears to be declining about 144 million tons in 2009due to demand for substitute forms of energy and a drop in industrializedpower. That's why it has been stuck at $52/ton from Central Appalachian minessince mid-July.
However, Yu expects demand-and probably prices-to improve in2010 as users buy an additional 33 million tons of thermal when industrialpower picks up again. He sees "an improvement in U.S. coal demand (as) themanufacturing recovery drives greater industrial power demand." The EIA alsosees 2010 demand for coal increasing by 2%.