Ukrainian Coking Coal May Rise 14% After Blast, Dragon Says

Ukrainian coking coal, used by steelmakers, may rise as much as 14 percent next month after production was cut at the country\'s second-largest mine, investment bank Dragon Capital said.

A methane explosion Nov. 18 at the OP Zasyadko mine in the eastern Donetsk region killed 100 people, according to the Ministry of Emergency Situation. The cost of a metric ton of washed coal, a purer coking coal, rose to $145 this month, from $107 in October, according to Dnipropetrovsk, Ukraine-based researcher Metal Expert.

``We don\'t see any reason for the price to go lower,\'\' Kiev, Ukraine-based Dragon Capital analyst Sergiy Gayda said in a phone interview today. Demand for the fuel is ``robust\'\' and shortages will be exacerbated by the lost production, he said. Prices may rise $10 to $20 a ton, he said.

Demand for steel has risen globally, driven by Chinese economic growth, the fastest of any major economy, and an eastern Europe housing boom. Coal prices have also risen to a record, spurred by supply bottlenecks in producer countries such as Australia and South Africa.

Ukrainian coking coal production has dropped 15 percent since 2000, according to data from the International Energy Agency. Its steel output increased 30 percent in the same period, according to the International Iron & Steel Institute.

It may take as long as six months for production to recover at Zasyadko, Gayda said. Ukraine can import only a limited amount of coking coal from neighboring Russia because of that country\'s own demand and a lack of available rail cars, he said.

Steelmakers may seek alternative sources for their coal or curb production, Gayda said.

Ukraine is Europe\'s third-biggest supplier of all varieties of coal after Russia and Poland.