Commodity’s 2016 Champ Extends Rally as Met Coal Output Squeezed

  • Price extends gain to $232.60 a metric ton Monday: Steel Index
  • RBC boosts estimates on supply deficit seen continuing to 2019

Metallurgical coal is extending the record-breaking run that’s made it the best-performing commodity this year.

Spot hard coking coal rose $6.30, or 2.8 percent, to close at $232.60 a metric ton on Monday, according to data from The Steel Index. That’s a record high for the index that started in January 2013. RBC Capital Markets this week raised its price forecasts for 2017 and 2018 by more than 50 percent on a shortage that’s estimated to extend until rebalancing occurs in three years.

Metallurgical coal has almost tripled this year as China reduced output and disruptions crimped production from Australia, the world’s biggest shipper of the raw material used to make steel. Japan’s Nippon Steel & Sumitomo Metal Corp. are among users bearing the brunt of the price surge as the company last week agreed to pay the most in four years for quarterly supplies.

“The squeeze is still on in the very short term,” Daniel Morgan, an analyst with UBS Group AG in Sydney, said by phone. “Supply is going to return, but it will take time and I think there will be robust prices for the next few months.”

RBC, in a note on Sunday, increased its forecast for hard coking coal next year by 65 percent to $165 a ton. It boosted its estimate for 2018 to $150, joining banks including Goldman Sachs Group Inc. and Macquarie Group that have raised price projections.

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