Low Demand Spurs Euro Coal Price Drop

Posted by Michelle Howard
Monday, May 12, 2014

European physical coal prices dropped on Monday as demand across the region fell on the back of mild weather and healthy stocks.

Cargos for delivery in July to Amsterdam, Rotterdam and Antwerp (ARA) were trading at $77.50 a metric ton, down around half a dollar since their last settlement, and cargos for delivery this month from South Africa's Richards Bay terminal fell $0.7 to $77.50 a metric ton.

Traders said the lower prices were a result of weakening European demand.

"Winter was mild, and so has spring so far. Coal stocks are high so utilities are burning down their reserves before placing new orders," said one coal trader.

Standard Bank said in a research note published last week that Europe's thermal coal market was well supplied. "Coal supplies to Europe will increase as Drummond (in Colombia) ramps up capacity (and) other Colombian suppliers are also increasing shipment rates, leading to an improving 6-10 million metirc ton run-rate from Colombian miners across Q2," it added.

In the futures market, API2 2015 coal swaps contracts were trading at $82.50 a metric ton, in-line with a price range in which the contract has traded since the beginning of the month.

"Coal futures as well as German power futures are both very rangebound at the moment and either would require a shift in fundamentals, such as major fuel supply interruptions or big economic events to move them up or down a lot," one futures trader said.

(Reporting by Henning Gloystein, editing by David Evans)

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