Prices may keep on climbing in 2005

Prices may keep on climbing in 2005, speakers predict

Washington DC (Platts)--13Dec2004


Coal buyers and sellers can expect to see more volatility in the market and
higher prices in 2005, coupled with lingering uncertainty about emissions
requirements, but those very factors will also open more opportunities.
Several speakers reached that conclusion at the joint Coal Trading
Association/American Coal Council meeting Dec. 9 in New York City. 

The impact of higher prices goes well beyond just the market, said Peter
Fusaro, chairman of Global Change Associates, who spoke about energy hedge
funds. He talked about "a sustained bull market in energy for many years," fed
by rising energy consumption and facing more geopolitical risk and continuous
and rising volatility. He predicted that coal prices will likely triple their
price a year ago (In March 2003, PCT showed prices in the low $30s for NYMEX
look-alike). They have already doubled, he noted. 

Taking a different view, Stephen Doyle of Doyle Trading Consultants said the
Burlington Northern Santa Fe and Union Pacific railroads will improve their
service, bringing more Powder River Basin coal into the East, which will lead
to more prompt activity. CSX and Norfolk Southern will show improved
performance as well. Uncertainty in emissions allowances prices and compliance
will add to volatility, he added. 

Volatility creates opportunities in the market, and new merchants, bankers and
others are entering the market to take advantage of those opportunities, said
Stephen Smith, vice president of coal and emissions trading for Sempra Energy
Trading. He foresees declines in Central Appalachian production coupled with
transportation issues, leading to PRB coal moving eastward to fill the gaps,
changes in inventories and difficulties in permitting new mines.

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