Coal news and updates

Front-year coal may extend near 2-year lows

European coal prices fell two a two-year low on Monday, with traders expecting further losses this week amid lacklustre utility demand and competition from gas.

The API 2 front-year contract traded last down USD 1.20 at USD 68/t, after earlier reaching its lowest on a rolling basis since June 2017, of USD 67.50/t, on Ice Futures.

Closer in on the curve, the front quarter was USD 1.22 lower at a seven-week low of USD 61/t.

One coal trader with a European trading house said liquidity was thin, in part due to a national holiday in the Asia-Pacific trading hub of Singapore.

Also, European market participants have begun gathering in Nice for a coal industry event on Tuesday.

“I don’t really see anything [fundamental] that has changed,” he said, noting the market would likely still look to gas for direction.

Gas pressure

The Dutch TTF gas front-month contact changed hands last down nearly 5% on the week at EUR 13/MWh – only marginally above Friday’s multi-year low of EUR 12.80/MWh – exchange data showed.

“Coal and gas prices are still connected,” said a coal analyst with a London-based consultancy, who also pointed to a seasonal decline in demand.

“Prices [could] see further losses in the near term, driven mainly by warmer weather, that will reduce coal demand for power generation,” he said, also citing the bearish influence of increased renewables output across the region.

The recent drop in gas prices, coupled with stable CO2 prices, has also made the fuel more profitable for generators to burn than coal.

Forecaster SMHI said northwest Europe would see “drier and warmer than normal” weather over the coming three months, with June averaging 1C above seasonal norms.

“Warmer temperatures are also expected to accelerate the snowmelt, which consequently will increase hydropower generation,” he added.

Diminishing demand

The European coal market has garnered some support in recent weeks from the arbitrage of Atlantic-basin coal to the Pacific – where physical coal prices are still at a significant premium to their Atlantic counterparts.

But such support may be diminishing, said an analyst with a Europe-based energy firm.

“Coal stocks at Chinese power plants are very strong, thus demand is low,” she said, adding this meant less demand for Atlantic material.

“[So] low Asian demand combined with low gas prices should weigh on API 2.”

From a technical viewpoint, the Cal 20 contract faced some further bearish momentum in the near term, said Tom Høvik, Montel’s head of technical analysis.

This morning’s break below the USD 68.50/t support level, could trigger further losses towards a new USD 66/t support, he noted.

Stocks

European coal terminal stock levels as of 20 May, obtained from the respective terminals (against previous week):
EMO (Rotterdam) – 3.9m tonnes (0.1m tonnes)
OBA (Amsterdam) – To be added later
EBS (Rotterdam) – 0.33m tonnes (-0.03m tonnes)
Ovet Vlissingen/Flushing – 0.37m tonnes (-0.025m tonnes)
Ovet Terneuzen – 0.235m tonnes (0.015m tonnes)

Source: Montel