Coal news and updates

Euro coal: Physical coal prices drop below $70/t on low summer demand

* Asian coal prices also down on low Chinese power plant coal use

* Coal prices have halved since 2011, are close to 5-year lows


European coal prices continued to drop on Wednesday as healthy stock levels and imports met persistent low demand, pulling the market down towards five-year lows.

European physical coal prices for delivery within this month fell to $69.75 per tonne on Wednesday, down $0.75 since their last settlement and close to five-year lows. Prices for delivery in August were down 30 cents to $70.20 a tonne.

"A mild winter was followed by a mild spring, which entered into a warm start to the summer, so heating demand has been rock-bottom for most of the year. That's left stocks full while at the same time Atlantic supplies are healthy. The result is weak prices," one coal trader said.

Asian coal prices are also weak as record Australian output in the first quarter of this year was met by slowing import needs in China, the world's top coal buyer.

"Weakness in the (Chinese) manufacturing and construction sectors is one of the reasons why in 1H 2014 (first half 2014) the utilization of power generation capacity lagged behind the average of the last 14 years," brokerage Marex Spectron said on Wednesday in a research note.

"The result was ultimately disappointing coal burn rates and declining coal imports," it added.

Marex Spectron also said despite an overall positive outlook for China's economy, coal prices would not find a floor before Chinese utilities began burning more coal again.

Australian cargoes from its Newcastle terminal and for delivery in August last settled at $69.50 a tonne, also close to five-year lows, and European and Asian coal prices have now more than halved since last peaking in spring 2011 when the meltdown at Japan's Fukushima nuclear reactor, Australian floods shutting down coal mines, and the Arab Spring pushed up global prices.

LOSS MAKING MINERS

Analysts said the low prices were forcing many producers to operate at a loss and that more mines would have to reduce production or close down before prices recovered significantly.

"A growing share of the sea-borne supply community is operating at negative margins to cash cost," Morgan Stanley said this week in a research note.

"While some of the top global miners have either halted operations or slowed expansion plans, current price dynamics suggest we need to see more to assist in a price recovery, including a slowdown in U.S. exports," the U.S. bank added.

ASIAN SUPPLY SQUEEZE?

Despite the recent falls in coal prices, traders said the Asia/Pacific market could tighten in the coming days and weeks as Indian utilities run out of coal stocks, forcing them to order imports from South Africa.

Nearly half of India's coal-fired power stations only have enough stocks to last a week.

"Thermal coal inventories at Indian power plants are currently at their lowest level since Q1 2013. As of the end of last week, they equate to just 8 days of consumption..., down from 15 days at the start of April," Australian bank Macquarie said in a research note.

"Out of a total of 100 generators surveyed, 43 reported critical stock levels of less than 7 days worth of consumption."

Soure: Reuters