Nena News

COAL – Mixed drivers shackle API 2

(Montel) European coal prices have flat-lined as a weaker physical market and profit taking offset likely strong demand in both Europe and Asia, with mixed drivers continuing to confuse the outlook, players said on Thursday.

The Global Coal rolling delivered ex-ship, Amsterdam, Rotterdam or Antwerp (Des ARA) index was last assessed at USD 87.10/t, up 0.6% week on week.

A January-loading cargo for delivery in north-west Europe traded via broker Global Coal in the current session at USD 87.50/t, down from the previous such trade, concluded on Tuesday at USD 89.50/t.

On the paper market, the Cal 17 API 2 contract traded last at USD 66.80/t, down USD 0.45 on the day but 1.5% above the close last Thursday, according to Ice data.

Profit-taking and a weaker physical market were largely offsetting anticipation of strong winter demand in both the Atlantic and Pacific basins, players said.

“API 2 prices seem rather trapped at the moment, so further sideways trading seems likely,” said a Finland-based coal trader.

“There are good arguments for prices to both rise and fall over the short term. Supply should increase in Asia, which is bearish, but then again Fob [free on board] prices are holding rather well, still above the curve, and this is bullish.”

Weather forecasts
Traders were keeping a close eye on northern hemisphere winter weather forecasts as well as potential supply disruptions in the main supply regions, said Nena analyst Diana Bacila.

“Rainfall still poses a risk to coal production in Indonesia and heating demand will increase in the Far East if this winter turns out colder than what we have seen over the past two years,” she said.

“The production ramp-up in China will continue improving the country’s coal balance, but import levels may sustain high due to low inventories,” she added, noting that Indian buyers were conversely looking at its domestic market rather than imports.

Indeed, the market in Asia could start to tighten up, said Alan Richards, an analyst at Mitie Energy.

“There is… still concern over the weather in Asia and also what impact the lifting of Chinese production restrictions will have on the front of the coal curve,” said Richards.

In Europe, coal consumption will continue to rise due to the nuclear outages in France and low hydropower in the Nordics, said Bacila.

“There are also risks of sudden supply disruptions present in Colombia and Russia,” she said, noting the potential strike by Glencore’s workers in Colombia at the end of December and icing in the Baltic sea.

“All in all, drivers are mixed, but high volatility will persist throughout this winter season.”

The trader said the market would continue to trade largely range-bound, notwithstanding some intermittent price volatility.

“Maybe if we see oil prices lifting further we could see coal following, but I don’t see much on the coal side that should push the market in any direction,” the trader said.

“Of course if the weather turns very cold in Europe, and with the nuke situation still ongoing in France, we could see a surge in prices, but I just see that right now. So sideways is the name of the game now.”


Reporting by:
James Allen
17:58, Thursday, 1 December 2016