Four Key Drivers for Coal, Steel ETFs

March 18th, 2010 | Posted by etf

Coal and steel ETFs have been quiet this year, but if some analysts are correct, it could really just be the calm before the storm that is the global economic recovery.

Following a decline last year, a substantial increase in metallurgical coal contract prices is expected for the coming financial year because of strong global demand for coal. What’s more, steel is forecast to enter a phase of intense demand, further supporting coal demand.

Stuart Burns for Ag Metal Miner reports on the strong factors driving the growth of these commodities:

World metallurgical coal demand is strong, driven mainly by expanding steel industries in China and India. Iron ore prices are expected to rise substantially as well.
China remains the main driver of growth in world steel production and is expected to account for around 70% of the increase in world steel output this year.
With the introduction of an iron ore export duty by the Indian government and a significant depreciation of the U.S. dollar over the past year, prices are poised up to skyrocket.
Beijing’s shift to a net importer follows a clampdown on illegal and unsafe mining operations, but has enabled the Australian miners to keep the market tight as demand has dropped elsewhere.

Iron ore or coking coal prices are not expected to come down from their levels now. A fall in the raw materials sectors would only be attributed to a sudden drop in Asian demand and production.