Nena News

COAL – China stimulus gives prices brief relief from lows

 (Montel) European coal prices touched new lows over the past week, although they found some tenuous support as key consumer China took steps to alleviate global concerns about its slowing economy, participants said on Thursday.

The Cal 16 API 2 contract hit a record contact low of USD 51.20/t on Wednesday, having fallen 3% over the past week, but rose marginally in the current session to a latest trade at USD 52.05/t.

On the physical market, the Global Coal Des ARA index was last assessed at USD 53.82/t, down nearly 2% week on week.

“Prices seem to be responding to oil, and the reduction in China’s interest rates, which has given some lift to the market,” said Diana Bacila, coal analyst at Oslo-based consultancy Nena.

The Brent front month crude contract last traded at USD 44.80/bbl, up by around 6% from Monday’s 6.5-year low of USD 42.23/bbl, after China cut interest rates and banks’ reserve requirements to support the slowing economy and stem a rout in share prices that has alarmed global markets.

“China is giving some stimulus to its economy, and this is positive for commodity imports,” said Bacila, noting however the fundamental outlook for coal demand, globally, remained relatively weak.

“There will not be much more demand in September, as it’s still the low season, with restocking [for the winter] only beginning in October,” she said, noting strong Russian export levels were also particularly bearish for the European market.

Russian coal exports in July totalled 429,000t/day, the highest level since June last year, Montel reported earlier this month.

Furthermore, UK coal imports in June slumped to their lowest levels since August 1999, at 1.26m tonnes, due to a sharp decline in consumption.

Asian view
In Asia, where demand fluctuations can have a marked impact on European supply and price movements, import demand remains relatively weak from key consumers China and India.

“The market looks bad here, really bad,” said a Singapore-based coal trader, adding “I am still bullish medium-term, from 2017 onwards, due to the [increasing coal-fired power capacity in] south-east
Asian emerging markets, but the volumes they are buying today are not sufficient to offset the downturn in Chinese demand”.

China’s thermal coal imports are likely to fall by 79m tonnes year on year to 145m tonnes in 2015, due to a drop in coal-fired generation and a “rebalancing” of the country’s energy market, Montel reported on Wednesday, citing analyst Guillaume Perret of Perret Associates.

Chinese coal and lignite imports fell 8% year on year in July to 686,000t/day, customs figures showed this month.


Reporting by:
Laurence Walker
12:44, Thursday, 27 August 2015