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European year ahead: Coal prices rise to 3-month high

European year-ahead coal rose to the highest in three months on speculation that Ukraine’s exports of the fuel may be interrupted by unrest in the east of the country while cold weather hampers Russian supplies.

Coal for 2015 delivery to Rotterdam, Amsterdam or Antwerp advanced as much as 1.2% to the highest since Jan. 30, according to broker data on Bloomberg. Month-ahead coal rose by the most since April 16.

Operations at mines in Ukraine, which exports about 8 million metric tons a year, may be disrupted by the dispute with Russia, according to Georgi Slavov, an analyst at Marex Spectron in London. Ukraine produced 64.7 million tons of hard coal in 2012, the second-highest output in the European region after Poland, data from Brussels-based lobby group Euracoal show.
“If Ukrainian output is cut by the political unrest, then customers in countries like Bulgaria, Romania and Turkeywill have to buy their coal from other sources,” he said.

Coal for next year rose to as high as $84 a ton today, broker data show. The contract was trading at $83.85 at 4:48 p.m. in London.

A seasonal drop in output in Russia that started in December may still be crimping supplies from Murmansk and the Baltic ports, Slavov said. Temperatures in Siberia, Russia’s main mining region, were as much as 11 degrees Celsius (20 Fahrenheit) colder than normal in January, according to Hydrometeorological Centre of Russia. February and March were warmer than usual, according to the weather service.

“Interruptions in production can take anything from two to three weeks to six to eight weeks to work their way through to the seaborne market,” Slavov said.

Source: Bloomberg