UBS slashes coal price forecasts for 2009, 2010

HOUSTON Thu Dec 18, 2008 7:13pm EST

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HOUSTON Dec 18 (Reuters) - The world economic slowdown has caused UBS (UBS.N) to cut its forecast for U.S. coal prices in 2009 and 2010, an analysts' report said Thursday.

The investment arm of Swiss bank UBS AG dropped its forecast for hard coking coal for steel-making to $85 a metric tonne in 2009, from $180, and to $115 in 2010, from $130.

For thermal coal for power plants, the analysts cut UBS' estimate to $55 a short ton <0.91 metric tonne> for premium grade in 2009, from $70, and to $60 a ton in 2010, from $65.

"With the deterioration of global economic activity, coal pricing and contracting remain uncertain," the report said.

The analysts wrote that, based on conversations with executives at a recent UBS coal conference, they expect lower prices to result in less U.S. coal production.

Many companies are slowing capital investment and considering idling high-cost mines, the analysts wrote.

The report estimated that U.S. coal supply in 2009 will decline 19.2 million tons after rising 15.8 million tons in 2008. Total U.S. production exceeds 1 billion tons.

U.S. exports rose sharply in 2007 and 2008 as the worldwide economy boomed and competing exporting countries had delivery problems.

Less U.S. output could limit oversupply and mitigate long term price impact. Steel-making coal remains in short supply and would rebound first in economic recovery, the report said. (Reporting by Bruce Nichols; Editing by Christian Wiessner)

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