Nena News

COAL – Cal 18 gains as China demand set to rise 

(Montel) European and Asia-Pacific coal prices for 2018 rose on Friday amid expectations of a step-up in demand from key consumer China.

The API 2 Cal 18 contract traded last up USD 1.06 at USD 84.75/t on Ice Futures, while in the Pacific basin the equivalent Newcastle (Australia) contract gained USD 0.54 to USD 87.60/t.

“People are looking at China, where [prices] have stopped falling and have actually risen over the last two days,” said a coal analyst with a large trading firm.

“The domestic market seems to be responding, so the hopes are that port restrictions will end and Chinese imports will resume for 2018 – we’ll see,” he added.

Restrictions on imported coal deliveries to China have resulted in some congestion and therefore lower import demand in recent weeks. But there are expectations of more leniency on imported material by early next year.

The front-year API 8 contract, which reflects 5,500 kcal/kg coal delivered to south China, closed on Thursday at a three-week high of USD 83.73/, on Ice Futures. This was up by 7.5% from last Friday’s seven-week low of USD 76.96/t.

“China will take imports when they need them, but now that the 2018 domestic supply agreements are being negotiated, it is not convenient to let imports in,” said a Singapore-based coal analyst, with a trading house.

Participants also attributed the fresh bullish sentiment in coal prices to forecasts showing a 70% chance of the La Nina weather pattern returning this winter, albeit for a short period.

The weather pattern is generally associated with above normal rainfall in affected areas, including Australia, Indonesia and Colombia – all important coal producers.

Technical indicators were also proving supportive, in the short-term, Montel reported on Thursday.

Baltic issues
In Europe, there were some “logistics issues” affecting Russian exports from Baltic ports, but they were not considered to be significant, market participants said.

“It’s a bit early yet for the ice, so I’d rather blame rail bottlenecks [for loading delays] as exports should be rising,” said an analyst with a Moscow-based trading house.

Baltic coal exports sometimes face disruptions in the winter months from widespread ice coverage.

The Baltic Sea is still ice-free at present, although there is “new ice” forming in the far north, according to the Finnish Meteorological Institute.

“Ice problems have not started yet, but with La Nina’s chance so high, there is a high probability to see below normal temperatures in the northern hemisphere, and therefore ice forming quickly in the Baltic Sea this winter,” said Diana Bacila, analyst at Nena.

“[This could cause] shipping disruptions for Russian coal exports into Europe”.

Reporting by:
Laurence Walker
12:28, Friday, 24 November 2017