Investment banker UBS has predicted that international contract prices of coal could rise by 64 per cent in 2005 while iron ore prices could rise by 20 per cent in 2005. | |
| The rise, according to UBS, would be driven by rising demand from Chinese steelmakers and power stations, which would require huge additional quantities of these raw materials. |
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| According to UBS, the benchmark Japanese contract price for coking coal, which goes into manufacture of steel, was likely to rise by as much as 64 per cent to $90 a tonne in the next fiscal year. |
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| The current contract price was around $55 a tonne. This grade was in short supply in India. The prediction made by UBS said iron ore prices would rise as much as 20 per cent. |
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| The investment banker said all major commodities were likely to be in short supply by end-2004 and would remain the same through all of 2005. |
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| It was estimated that commodity prices would start falling only in 2006 when supply would surpass demand following commissioning of new facilities. |
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| Coal prices had risen as China, the world's biggest producer, had cut exports to meet demand from domestic steelmakers and power stations. |
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| UBS warned prices of semi-soft coking coal could rise 59 per cent to $70 per tonne from April 2005. |
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| Prices of hard coking coal could decline by 22 per cent only after 2006 to $70 per tonne. Iron ore prices could fall 20 per cent after 2006, UBS said. |
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| Credit Suisse First Boston in a separate report indicated a rise in iron ore prices by 15 per cent in 2005, followed by a fall in 2006 and 2007 as mines expanded capacities. |
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| The Indian steel industry was likely to be hurt by rising coke prices, as much of the coke used was imported into the country. |
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| Spiralling spot prices of coking coal had led Indian users to enter into supply contract with overseas sellers. |
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| Nevertheless, the cost of coke per tonne of steel could rise by as much as 64 per cent, squeezing margins. |
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| Industry analysts said if contract prices rose by 64 per cent, spot prices were likely to rise by much higher percentage. |
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| Users which depended on spot purchases would have their margins eroded by a much greater degree. |
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| Many companies buying from the spot market could find themselves becoming uncompetitive against manufacturers working on long contracts. |
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| Demand both in national and the international markets could push up steel prices and only a sustained rise in steel prices could save players dependent on the spot market for iron ore and coal. |
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