Coal prices to jump next year, Citigroup says

First $100 a barrel oil. Soon $100 per metric ton coal?

Citigroup is forecasting the price of thermal coal will nearly double in 2008-09 from its current price of $55 per ton — and that doesn’t reflect the cost of anticipated carbon regulation. The price spike has more to do with weather than climate: A harsh, snowstormy winter is chilling mining activity in China, and flooding has washed out production in Australian mines.

It’s the second batch of bad news for coal to come from the company’s Citi Investment Research division in less than a year. In July, a Citigroup analyst advised against investing in coal companies due to a variety of concerns. It noted that natural gas is grabbing a bigger share of power generation, and that new “clean-coal” technologies have failed to develop and remain a decade or more away.

Citigroup also predicted election-year politics won’t be favorable to the industry:

“Candidates are already stepping up to ‘ban coal,’” the analyst, John Hill, wrote, “while company productivity/margins are likely to be structurally impaired by new regulatory mandates applied to a group perceived as landscape-disfiguring, global-warming bad guys.”