Nena News

Front quarter coal prices slump to 10-week lows

(Montel) The API 2 front-quarter contract has slumped 4.5% so far this week to its lowest level for more than two months, as participants take profit from recent highs and Pacific basin supply concerns diminish.

The contract traded last down USD 1.70 on the day at USD 86.85/t, its lowest since 23 November, on a rolling front-quarter basis.

In the Asia-Pacific market, the equivalent Ice Newcastle contract traded last down USD 2.30 to USD 99/t, nearly 5% below Monday’s contract high of USD 104.05/t.

“The market is undergoing a major correction here,” said a dry bulk strategist with a European trading house.

The contracts had received significant support in recent weeks from concerns about a shortfall of supply in China, amid severely cold weather. But these concerns are beginning to ease, albeit tentatively, according to analysts.

“Major Chinese utilities have asked the government to direct coal producers to operate close to full capacity during the Lunar New Year [in mid-February] in order to secure coal supply and railways to prioritise coal deliveries, which should slowly help to improve supply,” said Diana Bacila, senior analyst at Oslo-based Nena.

Others have cited participants taking profits for the slump in prices.

“We have Chinese New Year in two weeks, so longs are getting out of the market and taking profit,”said a Singapore-based coal broker, adding “there is nothing fundamental in it”. 

Reporting by:
Laurence Walker
13:27, Wednesday, 31 January 2018

Editing by:
Jeff Coelho
13:27, Wednesday, 31 January 2018