TORONTO (miningweekly.com) – New York-based Dahlman Rose & Co expects US metallurgical coal markets to benefit from the continued strength in Asian demand, as well as increased steel capacity utilisation rates at home.

Analyst Daniel Scott has increased his metallurgical coal price forecasts for both 2010 and 2011, and raised the earnings estimates for all the companies he covers with exposure to steelmaking coal.

“China has continued to be a major force in seaborne metallurgical coal markets over the last several months after exploding onto the scene earlier in 2009,” Scott wrote in a note.

“Continued increased metallurgical coal imports by China point to a much tighter market in Asia than had previously been anticipated.”

Although the final data is still pending, the country is estimated to have imported about 34-million tons in 2009, compared with seven-million tons in 2008.

The total seaborne market typically amounts to about 220-million tons.

“Increasing metallurgical coal import demand from China, India and Brazil is likely to pressure 2010 pricing and force buyers to source coal from the US east coast,” Scott said.

US producers are seeing direct export sales as a result of increased demand from Asian markets, as Australian and Canadian exports failed to keep up.

This, combined with increased steel capacity utilisation rates in the US and improving European and South American demand, will likely increase pricing for all metallurgical qualities over the next two years, Scott wrote.

“We are increasing our metallurgical coal price forecast for 2010 and 2011 based on increased spot pricing, improved steel-market fundamentals and tighter near-to-medium term supply/demand characteristics,” Scott wrote.

Dahlman has also raised price targets on the shares of Consol Energy, Massey Energy and Walter Energy, and raised its rating on Patriot Coal to hold from sell.

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