(Montel) European coal prices may be nearing a floor, after sliding sharply in the first four months of the year, but oversupply and lacklustre demand will prevent any significant rebound, participants said on Monday.
The front-quarter API 2 contract traded last down USD 0.15 at USD 64.10/t, while the front year was USD 0.05 higher at USD 71.15/t, on Ice Futures.
“I see downside limited for [European] coal in the short and medium term, simply due to higher price levels in Asia-Pacific markets,” said Hans Gunnar Nåvik, senior analyst with Oslo-based StormGeo.
The Global Coal Des ARA index was assessed last at USD 59.30/t – a discount of nearly USD 30/t to the broker’s Asia-Pacific benchmark Newcastle index.
This compares with an average discount last year of USD 15/t.
A Russian cargo for delivery in northwest Europe traded on Friday at USD 59/t, while another cargo – of not specified origin – changed hands at UD 58/t.
A UK-based physical broker said it had been “a nice surprise” to see the trades.
“There is a bit more activity [this morning], but it’s not exactly setting the world alight,” he added.
Price floor?
The API 2 front-year contract has shed 15% since the start of this year, reaching its lowest since mid-2017 in early April of USD 68.50/t.
Yet participants said the market was unlikely to move much lower in the near-term.
“For now, I'd probably agree [the market has reached a floor] – it’s fallen a long way,” the broker said.
“I believe the spot ARA coal price to be in supply destruction territory,” Nåvik said, regarding levels at which some higher-cost producers would consider reducing output.
“Thus, I see some fundamental resistance against lower prices.”
A trader with a US coal supplier said it was “very difficult” to place supplies into Europe for the remainder of the year.
“Some high-sulphur [grades] may make sense later in the year, but generally it’s not pricing well and to be honest Europe doesn’t need more coal,” he said.
Combined stocks at four key northwest European dry bulk terminals, monitored by Montel, were seen this morning at 6.9m tonnes, nearly 60% higher on the year.
Stocks
European coal terminal stock levels as of 29 April, obtained from the respective terminals (against previous week):
EMO (Rotterdam) – 3.8m tonnes (unchanged)
OBA (Amsterdam) – 2.23m tonnes (0.03m tonnes)
EBS (Rotterdam) – 0.385m tonnes (-0.01m tonnes)
Ovet Vlissingen/Flushing – 0.49m tonnes (-0.07m tonnes)
Ovet Terneuzen – 0.24m tonnes (unchanged)
Reporting by:
Laurence Walker
laurence@montelnews.com
12:47, Monday, 29 April 2019