Merrill Lynch said while it remained positive, it expected premium hard coking coal to slide but arrest above $100/t, PCI and semi-soft prices to rise, and semi-hard to roll over.
It said the big issue this year would be whether some mines’ production was reclassified from premium hard to semi-hard.
Analysts at Macquarie Research said the greatest potential for a price drop in the coking coals was for the weaker qualities, “which appear to have been squeezed out of the blend by some coke makers in preference for greater semi-soft coals (on the grounds of low price) and better quality coals (to maintain coke quality while using more semi-soft)”
Macquarie predicted some of the semi-hard coals may be at prices below $95/t in upcoming negotiations.
On the flip side, Macquarie raised its forecast for semi-soft and pulverised coal injection (PCI) coal for 2007 from $58/t to $62/t and $70/t to $75/t respectively.
Merrill Lynch said in the long term the major issues contributing to a reduction in coking coal prices would be an easing of Australian port congestion, a shift in China from net steel importer to net exporter and the expansion of Indian operations.