(Montel) Atlantic basin coal prices were little changed on the week as the prospect of ailing regional demand in light of widespread pandemic-related lockdowns offset lingering supply concerns.
The front-quarter and front-year API 2 contracts fell to their lowest levels since late August on Monday and Wednesday, respectively, of USD 51.60/t and USD 53.50/t, on Ice Futures.
But they had since recovered to USD 53.20/t and USD 54.75/t at the time of writing. “Covid-19 is having a great effect with more and more countries going into lockdown – or semi-lockdown – again,” said a source with a northwest European coal terminal.
France entered a fresh four-week lockdown last week, with the UK following suit this week and other countries across Europe stepping up efforts to stem the rapid rise in coronavirus cases.
“The longer restrictions take to slow down the spread of the pandemic, the larger the bearish impact on demand in the energy sector will be,” said Andy Sommer, analyst at Axpo Solutions, in a note.
“With uncertainty continuing regarding the length of the restrictions and their impact on energy demand, we anticipate energy prices will be driven mainly by news of the pandemic in the weeks to come,” he said.
While the results of the US presidential elections, Colombian coal-miner strike developments, weather factors and negotiations related to Europe’s 2030 and 2050 climate targets “must also be monitored”, they would likely “take a backseat in November”, he said.
“Lockdowns in France, Germany and to some extent Italy will impact demand,” said Wayne Bryan, director of European gas research at Refinitiv. But he noted, “if it gets cold, then it could become interesting.”
However, for the time being, despite some colder weather expected in the nearer term, large parts of Europe were likely to see slightly warmer than usual weather until February, according to The Weather Company.
“Weather will play a major driver in the short term,” said a coal analyst with an energy firm.
But she said more broadly that supply in the Atlantic basin remained relatively tight and the market could also draw some support from improved coal-fired generation margins this winter.
“The Colombian strike situation still lacks any agreement, thus those volumes will most likely not return for the remainder of this year,” she said.
Management and workers at the key Colombian Cerrejon coal-mining complex have still not resolved a strike which has now lasted for more than two months.
“We are hearing more hopeful noises from both sides,” said a source close to the situation.
He added, however, that this did not mean a deal would necessarily be struck. “You never know which way these discussions will go.”
Source: Laurence Walker, Montel
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