Coal news and updates

European and Asian coal prices kept sliding on Thursday as healthy stock levels and imports met persistently low demand, but traders said a threat of export disruptions in Colombia and a supply squeeze in India could give support.

 

European physical coal prices for delivery in September, the month utilities usually begin to start stocking coal again after the low demand summer season and before peak winter demand, fell $1.30 to $72.50 per tonne on Thursday.

 

"This year has seen very low demand for energy because temperatures have been above the norm pretty much non-stop since New Year's Day, and that's constantly dragged down prices for energy products like power, gas and coal," one trader said.

 

 

Not just coal prices are weak. European natural gas prices, which have been high relative to coal due to political unrest in gas-producing North Africa and in Ukraine, an important transit route for Russian exports to Europe, have halved since the beginning of the year.

 

U.S. natural gas prices are weaker still, having shed almost two-thirds in value since 2008, to around $4.15 per million British thermal units (mmBtu), as a result of the shale gas production boom.

 

Cheap U.S. gas and new environmental regulation have made coal-fired power stations less attractive in the United States, reducing domestic demand and leaving more coal available for sale on the world market, pulling down prices.

 

"We anticipate significant incremental gas generation load at spot (gas) prices under $4.50/mmBtu for July and early August. If prices hold at current levels through this time period we expect to see higher gas generation levels due to increased coal displacement," Societe Generale said in a research note this week.

 

PRICE SUPPORT?

 

In the Pacific region, coal prices were also down, with August cargoes from Australia's Newcastle terminal trading at $69.75 a tonne, down $0.10 since their last settlement.

 

The low prices are largely a result of record Australian in the first quarter of this year.

 

Despite the recent price declines, traders said markets could tighten in the coming days and weeks over fears of export disruptions in Colombia, an important supplier to Europe, and because of a supply squeeze in India, an important buyer of South African and Australian coal.

 

Mechanics at Colombia's main coal mining companies, including Cerrejon and Drummond, went on strike over pay and conditions on Wednesday, a stoppage that will affect output if it continues long enough.

 

In India, nearly half of all coal-fired power stations only have enough stocks to last a week.

 

"If Colombian exports get affected by the strike there, prices in Europe will receive some support, and the almost certainty of new orders from India should lend some support to prices in Asia and South Africa," another coal trader said.

 

Additionally, coal imports (including lignite) from China, the world's biggest buyer of the fuel, rose 4.3 percent in June to 25.05 million tonnes, data from the customs office showed on Thursday.

 

"If Chinese demand holds up, that should also begin to be priced into the market at some point soon," the trader added. 

 

 

Source: Reuters