Nena News

COAL – Rising energy complex, euro, Asian demand lift API 2

(Montel) Prompt European paper coal prices have risen this week alongside gas and oil contracts, with a rising euro, increased consumption and signs of a pick-up in Asian demand adding support, traders said on Thursday.

The Q3 API 2 contract last traded on Ice at USD 58.10/t, up USD 1.10 from last Friday’s close, while the Cal 16 last traded at USD 58/t, up by a more modest USD 0.55.

On the physical side, brokers Global Coal last assessed their delivered ex-ship, Amsterdam, Rotterdam or Antwerp (Des ARA) index at USD 57.49/t, down USD 0.74 from Friday.

“The rise in API 2 over the last days was mostly due to coal prices following higher oil and gas prices and a stronger EUR/USD,” said Diana Bacila, coal analyst with Oslo-based Nena.

“We have also seen increased coal consumption in power in Italy, Spain and UK over the past week, while reduced use in Germany due to higher solar and wind power output.”

Asian demand
The front-month contract for Brent crude North Sea oil was last seen at USD 64.94/bbl, up from USD 63.31/bbl at the close on Friday.

Gas for July delivery at the UK’s NBP rose to 44p/th on Tuesday, the highest since 15 April, according to Ice data. The contract was last seen at 42.50p/th.

The euro was last seen at around 1.1224 against the US currency, more than 1% stronger than at the end of last week, having strengthened steadily until Thursday’s session.

A stronger euro made dollar-linked commodities more attractive to European buyers. 

Traders are also eyeing a short-term rise in Chinese thermal power demand and increased imports from other Far Eastern countries, they said earlier this week.

Oil price recovery
From a longer term perspective, coal prices should rise as oil prices recover, said Energy Aspects analyst Trevor Sikorski.

“We tend to look at higher priced coal scenarios, as we think generally coal prices could trend upwards, more due to cost push pressure from any recovery in oil prices than underlying fundamentals for seaborne coal,” Sikorski said in a note on Thursday.

Oil prices have staged a recovery this year after collapsing from USD 115/bbl in June last year to a near six-year low close to USD 45/bbl in January.

However, coal fundamentals still suggested further losses, said Bacila.

“Coal consumption is entering low season while supply seems strong, despite Colombia’s Fenoco night ban being extended. The reason for stronger Atlantic supply is the recent decline in US coal prices.”

US coal exports from the East Coast of the US are now pricing in Europe at the same cost as Colombian coal, freight included, she added.

“The weakening Russian rouble against the dollar should be incentivising miners to ramp up production, which combined with US and Colombian coal volumes will more likely strengthen the Atlantic coal balance, putting negative pressure to coal prices.”

Reporting by:
James Allen
16:43, Thursday, 11 June 2015