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2014 Media Kit
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EURO COAL-Prices rise on tightening Atlantic supplies

By: | at 11:31 AM | Channel(s): Liner Shipping  

  • Cold weather limits U.S. exports to Europe
  • Russian exports also down
  • Uncertainty remains over Colombian January exports

LONDON, Dec 10 (Reuters) - European physical coal pricesrose on Tuesday as Atlantic supplies tightened on the back oflower U.S. shipments and concerns over Colombian exportdisruptions from January.

Coal prices for delivery in January into Europe’s main portsof Amsterdam, Rotterdam and Antwerp (ARA) had a mid-value of$87.25 a tonne on Tuesday afternoon, $0.65 above Monday’ssettlement.

The firmer physical market has also lifted coal futures,with API2 2014 contracts rising to $83.20 a tonne, their highestsince late October.

The price rises resulted from a drop in U.S. coal exports toEurope as cold weather in North America lifted demand and U.S.gas prices, making coal more competitive for U.S. powergeneration.

Coal has had trouble competing with gas in U.S. powergeneration as a shale exploration boom pulled down domestic gasprices in recent years, forcing U.S. coal miners to seek newbuyers abroad, including in Europe.

But cold weather and a broad industrial switch from coal togas has tightened the domestic gas market, lifting NorthAmerican spot gas prices to six-month highs over $4.25 permillion British thermal units.

“The proportion of coal-fired power generation had fallenfrom almost 45 percent in 2010 to 37.4 percent last year due tothe previously low gas prices. Its proportion is growing againnow, however, and is likely to reach 40 percent again nextyear,” Commerzbank said in a research note on Tuesday.

Traders said reports of lower Russian coal production hadalso supported European coal prices.

Russia produced 315 million tonnes of coal in the first 11months of 2013, some 1.9 percent less than in the same period of2012.

Uncertainty also prevailed regarding new ship-loading rulesin Colombia that come into force in January and oblige allexporters to switch from manual to automatic loading.

Colombia’s second-biggest coal miner, Drummond, as well assome smaller miners, are believed to be behind schedule inadapting their systems.

But they were in talks with the government over a compromisethat would avoid having to halt exports if automation is not inplace by Jan. 1, mining and trading sources said.

“The Colombian government will go into Christmas shutdownsoon, so if some form of compromise is to be found, it’ll haveto be this week in order for it to be implemented in time,“another coal analyst said.

The Colombian government has said it is seeking ways toenable miners to continue exporting coal even if they have notswitched to automated loading by Jan. 1.

Colombian coal export targets fell short of expectationsthis year due to the cumulative effect of strikes and rebelgroups’ bomb attacks on coal railway lines.

Sources say the government is keen to see a good start forexports in 2014, which is also an election year.

HIGHER PRICES?

Despite the current price rises, analysts said the overallcoal market remained weak, with no significant price gains seenbefore the second half of 2014.

Commerzbank said it saw demand rising in Europe and Asia,but added that coal output would also remain strong, cappingpotential price increases.

“The impact of increased demand on the price should belimited, however, as supply looks set to be plentiful. The coalprice is only likely to rise to $90 per tonne again in thesecond half of the year (2014),” the bank said.

Societe Generale said in November that it did not expectcoal prices to rise before late 2014 but added that moresustained price increases could be expected in 2015 as Asiandemand picks up.