Nena News

COAL – API 2 likely to remain below USD 50/t

 (Montel) European front-year coal prices are likely to remain below USD 50/t over the short term after the end of recent supply problems in South Africa, market participants said on Thursday.

The Cal 16 API 2 contract changed hands on Ice at USD 48.40/t, 1% lower than last Thursday’s close, but a touch up from the intraday low of USD 48.15/t from Wednesday.

The end of a week-long coal miners strike in South Africa on Tuesday meant traders had turned their attention back to the ample levels of coal supply available for exports to Europe, market participants said.

“We were lifting when this strike was on in South Africa and dropped right after it was over,” a trader told Montel.

The strike by around 30,000 National Union of Mineworkers members had affected operations at Exxaro, Glencore, and Anglo American, as well as some smaller producers.

With the strike over, fundamentals were now back in charge, clearing API 2 below USD 50/t, Diana Bacila, an analyst for Oslo-based consultancy Nena, told Montel.

“Oil prices fell back to USD 49/bbl, Atlantic miners’ FX [foreign exchange] are still relatively weak against the USD and freight costs remain subdued, offsetting the impact from a stronger euro to coal prices in dollar-terms,” said Bacila.

The front month Brent oil contract last traded at USD 48.35/bbl, down by around 9% week on week.

Despite weakening somewhat in the current session, the euro was still 1.2% stronger against the US dollar, week on week, at 1.1380 at the time of writing.

A stronger euro makes dollar-linked coal more attractive to European buyers.

Few upside risks
But China and India were not rushing to restock, while mild weather and abundant supply in the Far East meant there were few upside risks threatening the API 2 from the “Asian giants”, said Bacila.

“One major Chinese producer, Shenhua, had been reported to offer discounts to spot coal sales in October due to high stocks and low demand from power utilities, as hydropower in China is currently above seasonal norms capping thermal power.”

One bullish signal remained low river levels in Germany that is set to coincide with rising col burn due to low wind power generation in the next days, she added.

“This may spur import demand, but price support will be rather limited.”


Reporting by:
James Allen
18:13, Thursday, 15 October 2015