Nena News

COAL – Weak demand weighs further on prices

 (Montel) The European coal market remained under pressure over the past week, with abundant supply and unseasonably sluggish demand likely to weigh further on prices over the coming weeks, participants said on Thursday.

The Cal 16 API 2 contract softened 1.7% week on week to close on Wednesday at USD 44.44/t, on Ice, after hitting a contract low of USD 44.20/t on Monday.

On the physical market, Global Coal’s Des ARA index was last assessed at USD 47.23/t, up 1.3% week on week but still close to the multi-year low, achieved early this month, of USD 46.20/t.

A physical January-loading 50,000t cargo for delivery in Amsterdam traded via Global Coal at USD 48.25/t, in the current session. It was the first Des ARA trade concluded via the broker since 20 November.

But there were few bids or offers, said a physical coal broker, adding the market was “dead”.

There was unlikely to be much upside to the market for the rest of 2015 or in the first quarter of next year, with mild weather conditions resulting in low consumption, said Diana Bacila, an analyst at Oslo-based Nena.

“We may see some cold spells in Europe in Q1 but we can’t predict it at this stage,” she said.

In the nearer term, the UK was likely to experience its mildest December since records began in the mid-1600s, Montel reported earlier.

Oil, currency influences

Otherwise, traders continued to track movements on the oil and currency markets, in light of the dearth in fundamental market drivers, such as supply disruptions, Bacila said.

“Oil and currencies are most important,” she said, adding with the ruble currently at around 70 against the US dollar – and oil at close to USD 37/bbl and around a seven-year low – Russian producers could still export coal at as low as USD 42/t, due in part to the lower production and logistics costs.

Further price declines would be highly dependent on oil price and currency moves, she said.

Guillaume Perret, of consultancy Perret Associates, also said prices could fall to the low USD 40s in the coming weeks, assuming there were no supply “shocks”.

But for the time being, there was little sign of any near-term supply disruptions in Europe’s main supplier Russia, where winter ice coverage can sometimes hinder Baltic exports and frozen rail-wagon cargos can hamper unloading operations at export terminals.

In fact, the Baltic was still virtually ice free, according to charts published by the Finnish Meteorological Institute.

“In a couple of days’ time, Moscow could see temperatures at 14C above normal for the time of year,” said WSI forecaster Mark Stephens-Row.

Reporting by:
Laurence Walker
14:37, Thursday, 17 December 2015