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New UserTumbling Russian rouble pulls European coal prices with it
21 Jan 2015
European coal prices have struggled more than other global energy benchmarks this year, catching many traders by surprise, as rising exports from Russia weighed on the market.
One of the world's top five coal sellers, Russia's exports have been rising with the help of falling domestic consumption, along with the weakening rouble, which has shielded producers from falling coal prices to an extent.
A near 50 percent decline in the Russian rouble against the dollar since June, following Western sanctions against Moscow over its involvement in the Ukraine crisis and a fall in oil and gas prices, has made the country's coal extremely competitive in Europe.
"Russia is Europe's biggest coal supplier, and their dumping has pulled down the market much further than in other market regions such as Asia," said a coal analyst with a major trading house, speaking on the condition of anonymity.
Russian Energy Ministry data showed January-November 2014 coal exports increased 8.8 percent to 140.2 million tonnes compared with the same period the previous year.
Russia's December export data is due for release on Jan. 26.
Macquarie Bank forecasts exports from Russia and Australia to continue rising in 2015, aided in part by weaker currencies.
"The starkest example of FX (currency) boosting competitiveness is Russia, where FOB costs are down 35-40 percent since the start of 2014," the bank said in a commodities note.
"We expect a five million tonne increase (in Russian exports) in 2015."
Prices of coal arriving at Europe's main import terminals in Amsterdam, Rotterdam and Antwerp have shed over 20 percent in value this month. They are now at a discount of almost $15 per tonne versus coal exported from major global producer Australia.
The slump has also been driven by slower demand due to a milder-than-usual winter in the Northern Hemisphere as well as a deluge of cargoes from the United States.
Source: Reuters