Nena News

COAL OUTLOOK – Front quarter may extend 9-month lows

(Montel) European coal front-quarter prices may extend current nine-month lows this week, with limited generation demand and ample supply weighing heavily on the market, participants said on Monday.

The API 2 front-quarter contract traded last down USD 1.10 from Friday’s close at USD 81.30/t, while the front year was USD 0.80 lower at USD 79.50/t, on Ice Futures. 

The former contract earlier reached its lowest level since April last year, on a rolling basis, of USD 81.20/t. 

“A general driver across the northern hemisphere has been the weather,” said Hans Gunnar Nåvik, senior analyst with Oslo-based StormGeo Nena Analysis, noting the relatively mild winter so far had been a “heavy burden” on coal and related energy markets. 

Indeed, competing gas prices have also come under significant pressure, with the Dutch TTF front-month contract seen last down nearly 5% from Friday’s close, at EUR 21.85/MWh. 

According to forecaster SMHI, mild temperatures “will dominate” this month, with average temperatures close to normal, while there is also expected to be “good wind output”. 

As a result, there was likely to be a lower call on fossil-fuelled power units, participants said. 

A coal broker also pointed to the bearish impact of thin physical-market liquidity. 

Ample supply 
At the same time, there was no shortage of coal supply – despite some reported erosion in plant inventories – with stocks at northwest European ports still well above early 2018 levels, at close to 7m tonnes. 

There were also no significant disruptions to seaborne supply from key exporting countries. 

“The US weather has been mild [so far this year] so we could see more coal exported, that would otherwise have been consumed domestically,” said Nåvik. 

And from a technical viewpoint, the API 2 Cal 20 contract was likely to slide to the low USD 70s over the coming weeks, said Montel’s head of technical analysis, Tom Høvik. 

“After Thursday’s break below the USD 80.50/t support level, we have entered a structural downtrend,” he said. 

European coal terminal stock levels as of 7 January, obtained from the respective terminals (against 24 December levels): 
EMO (Rotterdam) – 3.8m tonnes (0.2m tonnes) 
OBA (Amsterdam) – 2.25m tonnes (0.05m tonnes)
EBS (Rotterdam) – 0.285m tonnes (unchanged) 
Ovet Vlissingen/Flushing – 0.77m tonnes (0.045m tonnes) 
Ovet Terneuzen – 0.19m tonnes (unchanged)

Reporting by:
Laurence Walker
11:37, Monday, 7 January 2019