COAL OUTLOOK – Prices to extend gains amid buoyant euro

(Montel) European coal prices may gain some further ground this week amid a buoyant euro versus the dollar and uncertainty regarding South African supply, participants said on Monday.

The Cal 18 API 2 contract traded last up USD 0.39 at USD 70.60/t, but it was still lower than Thursday’s eight-month high of USD 70.85/t.

On the physical market, the Global Coal Des ARA index was assessed last at USD 79.81/t, up 0.4% week on week.

Despite weakening somewhat from late last week, the euro remained strong against the US dollar – at around 1.14 – compared to just 1.05 at the start of the year. This encourages European buyers to purchase dollar-denominated commodities, such as coal.

Market participants also cited some uncertainty about South African supply, with railings to the key export hub of Richard Bay suspended in the current session.

But on the physical side, there was no obvious shortage in supply.

“US exports to Europe have picked up a bit recently, and Russian exports are higher year on year,” said Andy Sommer, senior analyst at Axpo Trading, adding even South African exports – which are largely shipped to India, and other Asian destinations – had increased to Europe in recent months.

“The overall picture seems to be a very ample and robust supply in the market,” he said.

“After so many supply disruptions since the start of the year, fewer weather disruptions are expected as the rainy seasons end,” said Diana Bacila, senior analyst at Oslo-based Nena.

And although Russian rail maintenance and strong Colombian exports to Japan, South Korea and India had tightened the Atlantic supply balance, US coal exports had “increased heavily”, largely offsetting any shortfall, she said.

European coal prices need to be above USD 80-85/t in order to entice US coal, she noted.

European coal prices will mainly take direction from weather-related developments over the coming month, Montel reported earlier.

Prices & Spreads

*Montel assessments

Stocks
European port coal stock levels as of 3 July, obtained by Montel from the respective terminals (against previous week):
EMO (Rotterdam) – 2.1m tonnes (-0.1m tonnes)
OBA (Amsterdam) – 2.05m tonnes (-0.06m tonnes)
EBS (Rotterdam) – 0.85m tonnes (unchanged)
Ovet Vlissingen/Flushing – 0.28m tonnes (0.03m tonnes), combined thermal and coking
Ovet Terneuzen – 0.12m (-0.005m tonnes), comprising petcoke, anthracite and coke

Events
There is a national holiday in the US on Tuesday.