Nena News

COAL – API 2 jumps to two-month high on cold snap

(Montel) European coal prices jumped to fresh two-month highs on Thursday as a cold snap that has hit central and eastern Europe looked set to spread across north-west parts of the continent, lifting demand.

The February API 2 contract traded last at USD 85.10/t, up 7.3% from last Thursday’s close, while the Cal 18 contract was USD 7.4% higher at USD 68.10/t, having risen to USD 68.70/t earlier in the session, the highest since 7 November, according to Ice Futures.

Likewise, on the physical market, the Global Coal rolling delivered ex-ship, Amsterdam, Rotterdam or Antwerp (Des ARA) index was last assessed at USD 92.81/t, up USD 3.3% from a week ago. 

“The cold spell that hit Europe from the east has offered support to both coal and gas prices over the past days,” said Nena analyst Diana Bacila, noting demand-side fundamentals remained supportive of prices in Europe.

“The spell will move to north-west Europe over the next days, lifting heating demand on the continent. Wind power in Germany will decline heavily next week, supporting coal burn.”

For the remainder of the week temperatures would average around -3C in Germany, falling to -7C next week, according to Swedish forecaster SMHI.

“As Rhine levels remain low and still impact barge shipments, higher consumption will reduce coal stocks at German power plants.”

Indeed, the market was still “booming” for the front quarter, said a Polish coal trader, adding, however, that prices were “overheated”.

“But it is still quite tight on physical. If I ask a Russian seller for very near-term spot cargoes, they say they are sold out, or give an unrealistically high offer,” he said.

Supply easing
However, supply-side fundamentals suggested some forthcoming bearish pressure, said Bacila.

“On the supply side in the Atlantic, weather in Russia is getting milder, thus coal exports see lower risk of disruptions. Also Colombia is now in dry season, supportive for exports.”

Milder temperatures in China and the onset of the Chinese New year holidays would also reduce coal consumption in Asia, whilst easing rain in Indonesia would help to improve coal supply in the Pacific, she added.

Whether the cold weather in Europe holds is “key” for the future price level, a Finland-based trader said.

“But I just don’t see us going through the previous high in Cal 18 at USD 71.40/t [from 7 November]. I just feel this recent lift is a bit too much.”

Reporting by:
James Allen
23:25, Thursday, 12 January 2017