Monday, March 10, 2008

Forget oil, coal prices to double this year

Over a burger and beer at the Brickskeller in Washington DC last night, Kentucky state geologist Jim Cobb walked me through the reasons why all the financial forecasters expect the price of coal to double or more in 2008. The estimates are for coal used in power plants and steel mills.

Asian demand is up and Chinese production down, Australia's production was disrupted by weather problems, and South Africa's power supplies are in dissarray. Merrill Lynch on Friday projected a 60 million ton shortfall of coal supplies for 2008.

Coal provides about 2/3 of the electricity used in Arizona. [above: Navajo power plant near Page]

Last month spot prices for coal used in electric power production hit $130 per metric ton, up 37% this year so far, after rising 73% in 2007. Coal for steel making may rise to $200 per ton this year, according to a number of banks.

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