Coal news and updates

European coal prices fell to fresh multi-year lows on Thursday as both physical and financial contracts suffered from oversupply despite falling output in the Atlantic basin. 

 

European API2 year-ahead coal futures contracts dropped as low at $78.85 a tonne, their lowest since September 2009. 

 

In the physical market, cargoes for delivery in July to the ports of Amsterdam, Rotterdam and Antwerp ( ARA) traded at $71 a tonne, down 60 cents from their last settlement, and close to their lowest level since early 2010. 

 

Both contracts are now more than 40 per cent below their last peaks in March 2011, when Japan's Fukushima nuclear crisis pushed up global energy prices, marking the sharpest price falls since the outbreak of the 2008 financial crisis. 

 

Traders said that the ongoing falls were a result of overcapacity and both seasonally and fundamentally low demand. 

 

"There's just too much coal around. Demand is low seasonally as we're entering the summer lull, and it's structurally low because Europe's growth is still sluggish and there are more and more fuel alternatives to coal, namely from renewables, but also from gas," one coal trader said. 

 

MINERS CUT OUTPUT 

 

Because of the weak prices, brokerage Marex Spectron said in a research note on Thursday that Atlantic coal mining capacity utilisation was falling. 

 

"Mining utilisation in the Atlantic basin has fallen from over 80 per cent to under 65 per cent in less than 5 months (and) must have been caused by aggressive capacity closure," said Georgi Slavov, head of Marex Spectron's Basic Research Group. 

 

Pacific utilisation, by contrast, has remained more stable, dipping from slightly above 80 per cent late last year to just under 80 per cent in May 2014, according to Marex Spectron. 

 

"The reason seems to be that US miners (Atlantic basin) have higher costs than some in Asia/Pacific, especially Indonesia, and hence a lot of US miners have stopped exporting, instead taking in more Colombian coal, where mining costs are low and freight distances and costs to North America low," said another coal trader. 

 

Despite the drop in mining utilisation, Marex Spectron said it remained bearish on all its 30-day coal price outlooks. 

 

"Mining output adjustment will only be felt in a year or so... Therefore, unless the mining output reduction accelerates and demand remains unchanged, we should not see any meaningful price change before the necessary supply-side adjustments take place," Slavov said. 

 

 

 

Source: Reuters