European prompt coal prices have risen to 14-month highs this week, buoyed in part by heightened demand, lingering supply concerns and a strong Asia-Pacific market.
The front-quarter API 2 contract on Friday rose to its highest since October last year on a rolling basis, of USD 63.50/t, up more than 5% on the week, on Ice Futures.
The front-year contract gained nearly 4% over the week to trade last at USD 62.95/t – its highest level since January. The gains in part reflected an increased European coal burn and diminishing stocks, with northwest European port inventories this week dropping to their lowest levels since May 2018 of well below 5m tonnes.
“But there are not a lot of buyers. There’re a few people starting to pick up the odd cargo but it’s not exactly a deluge of bids and there are still plenty of tonnes around, mainly Russian,” said a London-based broker.
“Realistically, the Atlantic is not tight, especially with Colombia coming back,” the broker said, referring to workers at key Colombian coal producer Cerrejon resuming operations on Monday following three months of strike action. However, a Cerrejon spokesman said on Thursday the firm had not yet resumed production.
“There are pockets of demand emerging and not much availability in the near term,” said a coal analyst with a producer. Colder weather forecasts and overall economic optimism were also playing a role, he added.
Forecaster SMHI saw temperatures across western Europe this week falling to as low at 3C below seasonal norms. “The colder weather combined with less wind have supported coal consumption in northwestern Europe, drawing down stocks,” said a coal analyst with a European utility. “A weaker dollar is also a support for API 2,” he said, in reference to a firmer euro making dollar-denominated coal more attractive for European buyers.
The euro had strengthened more than 4% against the greenback over the past month to 1.22 at the time of writing. The market also received support from a “tight” Pacific basin, with China “in need of more supply,” the analyst added. The Global Coal Newcastle index was pegged last at its highest since mid-January, of USD 71.80/t, having drawn support from a firmer Chinese domestic market coupled with weather-related export disruptions.
“Specific to coal is the Chinese strength combined with the NCIG shiploader [outage],” said the analyst with a producer. Storm damage last month to one of two shiploaders at Newcastle’s NCIG terminal has limited export capacity.
Source: Laurence Walker, Montel
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