Nena News

COAL – Prices hit fresh lows on thin physical demand

(Montel) Physical European coal prices eased to new lows this week as logistics problems in mainland Europe deterred utilities from purchasing spot supplies ahead of winter, although prices are approaching a floor, participants said on Thursday.

The Global Coal Des ARA index was last assessed at USD 50.50/t, unchanged since Monday and its lowest level since Montel began collating the data in February 2013.

On the paper market, the Cal 16 API 2 contract last traded on Ice at a fresh low of USD 47.05/t, down by around 3% week on week.

Physical trading activity has been extremely thin, with just three cargoes for delivery in north-west Europe changing hands via broker Global Coal so far this month, compared with 18 over the same period last month.

In fact, vessel arrivals were already showing signs of slowing, despite the impending winter, with combined coal inventories at four key north-west European dry bulk terminals have dropping to their lowest levels since mid-May, of 5.6m tonnes.

Terminal sources attributed this stock decline to less seaborne deliveries, rather than any increase in generator withdrawals.

“No price rise”
“I don’t see any huge risk of prices rising much in the coming months,” said Diana Bacila, an analyst for Oslo-based consultancy Nena, adding “there should be some restocking [in Europe], but this has been a bit delayed, because of the river level issues”.

Prolonged, critically low river levels in recent months in Germany have resulted in barge operatorsloading at more than 50% below capacity.

And there seems to be little sign of the situation improving in the near term, with the main nationwide indication point at Kaub, on the river Rhine, expected to drop from current levels of 95 centimetres to just 76cm by the weekend, according to Germany’s Electronic Waterways Information Service.

But despite the prevailing bearish sentiment, Des ARA index prices were unlikely to drop below USD 45-46/t, Bacila said, adding this reflected a production cost floor for Colombia, which has the lowest coal production costs out of the main Atlantic basin suppliers.

Guillaume Perret, of Perret Associates, also said spot prices are unlikely to decline much below USD 50/t, in a presentation at a coal conference in Barcelona this week, citing a likely “balancing” of supply and demand in 2016.


Reporting by:
Laurence Walker
12:48, Thursday, 22 October 2015