The 2017 API 2 contract dropped 4.2% in the week to Thursday, hitting a record low of USD 36.65/t on Ice as of 15:13 CET. Prices had held steady at USD 38-39/t throughout the second half of January.
“There are no big elements of support,” Guillaume Perret, an analyst at Perret Associates, told Montel. “We had a run in January where prices stabilised but that seems to have petered out.”
On the physical market, the Global Coal Des ARA index is the worst-performing of the three major indicators – Newcastle, Richards Bay and ARA – so far this year, having lost 5.3% since the start of 2016. In contrast, Richards Bay has advanced by 4.2% since 1 January, and Newcastle has edged up 0.9%.
The differing fortunes reflect the lack of buying interest from Europe, which was underpinned this week by a 4-year low in inventories at the major ARA (Amsterdam, Rotterdam and Antwerp) terminals.
Despite the overall weakness, prompt coal deliveries continue to trade at a premium to later-dated shipments, with March changing hands at USD 44.50/t and April at USD 43.75/t earlier in the week. A week ago both traded at USD 45.25/t.
Restocking
Forecasts of colder weather and less wind generation in the coming fortnight may be driving continental and UK utilities to restock at their plants, and this may be maintaining the backwardation in the price, according to Diana Bacila, an analyst at Nena in Oslo.
“Wind generation in Germany has been high in the last week,” she said. “In the next 10 days however, wind is expected to decline and temperatures are forecast to fall. That should be supportive for coal.”
Bacila estimated the average cash cost for Russian coal delivered to ARA is presently around USD 42/t, and noted that prompt market prices are high enough to encourage continued shipments.
Worries over a possible strike in Colombia may be pushing European buyers to bid just enough to guarantee continued Russian supplies, Bacila said.
“If there is a strike, European prices would need to rise by USD 6-7/t to start to attract US coal, and USD 8-9/t to bring South African shipments,” she said. “But that would trigger a battle for market share among all three suppliers.”
Elsewhere, Russian suppliers show no sign of cutting back production, and the growing volume of supply from that country will harden the competition for market share in both the Atlantic and Pacific basins as there are few indications that other high-quality exporters are cutting shipments.
Reporting by:
Alessandro Vitelli
newsdesk@montel.no
15:45, Thursday, 11 February 2016