(Montel) European coal prices for delivery next year fell to record lows on Thursday as the global seaborne market remained awash with bearish drivers, said players.
The Cal 16 API 2 contract last traded on Ice at a fresh low at USD 45.80/t, down USD 2.05 from last Thursday’s close and after hitting a three-week high of USD 49.05/t on 4 November.
The Global Coal Des ARA index was last assessed at USD 54.69/t, down 1% week on week.
“The global market remains fundamentally bearish due to mild weather, weaker industrial demand, a stronger US dollar, low freight costs, and low oil and gas prices,” said Diana Bacila, an analyst at Oslo-based consultancy Nena.
“The presence of El Nino remains a bearish driver for heating demand in the US, Far East and Europe this winter, while stronger than normal hydropower generation in China in the low season risks capping seasonal growth in coal demand.”
Chinese coal and lignite imports dropped to multi-year lows last month, customs figures showed on Monday, amid seasonally weak power demand and increased domestic coal usage.
“Despite Chinese coal imports falling in October along with domestic coal production, domestic coal prices failed to receive any support,” said Bacila, adding that declining coal inventories in India had also not spured coal import demand amid higher production and weaker industrial production.
“Lower Chinese and Indian demand have also reduced coal prices in Australia and South Africa, which allows certain coal qualities from these regions to competitively price in north-west Europe, increasing importers’ diversification opportunities and weighing on the API 2.”
Little upside
There was little upside potential on the immediate horizon, a trader told Montel, noting that the strength in the dollar was offsetting outright weakness in greenback-denominated coal prices for non-US producers.
“The dollar strength is actually giving producers, such as those in Russia, better prices, or at least stable prices, which is good enough for them to keep producing,” the trader said.
Exports from Russia and Colombia remained strong in October with few risks of weather-related supply disruptions over the short-term, noted Bacila.
And in Europe, demand was also likely to remain relatively weak, with ongoing barge logistics issues in Germany, due to critically low water levels, resulting in some delay to seasonal re-stocking.
“River levels in Germany remain low amid dry weather and surcharges continue being applied to barge shipments, which is denting demand for new coal purchases,” said Bacila.
But any price support from German utilities restocking when river levels rise will be “short-lived” and “limited” due to strong coal supply availability from both the Pacific and Atlantic basins, she added.
Reporting by:
James Allen
james@montel.no
21:13, Thursday, 12 November 2015