Coal-to-oil Conversion Sooner and Bigger, Says CS

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By Rudi Filapek-Vandyck

Bulk commodities specialists at Credit Suisse have increased their long term price forecasts for thermal coal by 20% to US$45/tonne. The experts cite strong demand from India and Malaysia as key factors in their expectations that the thermal coal market will remain tight, as well as the industry’s renewed interest in coal-to-oil/methanol conversion.

Despite ongoing scepticism elsewhere, Credit Suisse does not believe methanol conversion is "a fairy tale". The ongoing strong outlook for oil prices could well mean coal-to-oil conversion could come sooner and impact the market harder than many think possible, according to the analysts.

The broker said China’s first batch of coal-to-oil/methanol conversion lines would come as early as late 2007 and are expected to boost coal demand by 1-2% as feedstock, or equivalent to 10% of the seaborne market size.

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