Nena News

COAL – Traders eye fresh API 2 lows

 (Montel) European coal prices will likely fall to fresh lows around USD 45/t in the short term as Colombian exports pick up after last week’s court decision to lift the Fenoco train ban, players told Montel on Thursday.

The Q1 2006 API 2 contract last traded at a record low at USD 46.40/t, down USD 1.55 from last Thursday’s close, while the January contract was last pegged ta USD 47.60/t, according to Ice exchange data.

“European front month coal prices can fall to USD 45/t in the short-term, if more Colombian supply meets demand,” said Nena analyst Diana Bacila, noting lower industrial power demand during the holiday season and mild weather may also pose “negative pressure” to API 2 coal prices this month.

“The other big coal exporter to Europe is Russia, and based on Russian coal production costs plus freight to Europe, we see we see Q1 API2 prices likely finding some resistance at USD 45/t, as Russian coal output will start getting hurt at current oil prices and FX rate.” 

In Colombia, a crucial supplier of coal to Europe, a nine-month night-time ban on coal railings ended on Friday, raising the prospect of increased supply onto the European market. 

No physical cargoes for delivery in north-west Europe had traded via broker Global Coal since 20 November.

The Global Coal Des ARA physical index was last assessed at USD 49.11/t, down 7.8% week on week.

“Dead market”
“The market is pretty dead,” said a London-based physical coal broker, noting there was no real sign of near-term support. “Bid interest has evaporated.”

Overall there was still “too much coal around”, a trader told Montel, who also agreed prices would trade lower.

Warm weather in Russia was also supportive for higher coal production and shipments, while “optimal levels” of Indian power plant inventories would limit import demand, added Oslo-based Bacil.

“Some Australian and Indonesian coals are now cheaper for Indian buyers than South African coal, forcing South African miners to look for buyers in the Atlantic, which fills up the coal basket for buyers in Europe and increases competition between Atlantic coal sellers.”

Further out, the Cal 16 API 2 contract was last pegged at USD 45.60/t, down USD 1 from last Thursday’s close and after hitting a fresh contract low of USD 45.30/t on Wednesday.

Reporting by:
James Allen
21:35, Thursday, 3 December 2015