Nena News

END OF DAY – Coal surges on supply threats, Asia demand 

(Montel) Coal prices surged to fresh highs on Tuesday as a potential strike in South Africa threatened to disrupt Atlantic supply and a heatwave in Asia boosted local demand. 

The API 2 front-quarter contract leapt to a new 2018 high, reaching USD 97.30/t, up USD 1.30 on the day.

Diana Bacila, coal analyst at Oslo-based consultancy Nena, highlighted a pay dispute between unions and South Africa’s public utility Eskom that threatens to escalate from Thursday.     

“The country faces nationwide blackouts that will affect ports – and that will affect the Atlantic supply balance,” she said. 

In addition, a heatwave in China was boosting air-conditioning and sending energy demand surging. 

“It [heatwave] was expected to vanish, but it is strengthening,” said Bacila, adding the surge in Asian coal demand was pulling on supplies that could otherwise make their way to Europe.

A physical cargo of Australian coal for loading in July traded at a 2018 high of USD 120/t on Tuesday, up 5.5% on the week.

The API 2 front quarter’s premium of USD 7/t to the 2019 contract reflected the view that tightness in the coal market was only temporary, Bacila said.

The API 2 front year breached USD 90/t and was last seen trading USD 1.21/t higher at 90.15/t, its strongest since 15 May.

Fuel switch pressure
The surge in coal helped support European gas prices as the fuel became more competitive for power generation, said a European gas trader. 

The Dutch TTF front-year contract traded last up EUR 0.19 at EUR 20.08/MWh. 

Closer in, imminent maintenance on the IUK pipeline that links the UK to the continent sent spot prices for gas diverging on the NBP and TTF hubs.

Day-ahead gas plunged 1.53p to 54.40p/th (EUR 21.05/MWh) in the UK and rose EUR 0.17 to EUR 21.82/MWh in the Netherlands.
Meanwhile, the benchmark carbon contract slipped back below EUR 15/t for the first time in 10 days on Tuesday. It was last down EUR 0.30 at EUR 15.19/t, after earlier dipping as low as EUR 14.97/t. 

Brent crude oil prices eased half a percentage point back towards USD 76/bbl, a touch above where they stood this time last week.


Reporting by:
Nathan Witkop
16:48, Tuesday, 12 June 2018