Coal prices slide as stock levels swell
European coal prices face further pressure this week amid swelling stock levels, softer gas prices and muted generation demand, participants said.
The front-quarter API 2 contract traded last down USD 0.88 at USD 63.70/t, while the Cal 20 was USD 0.80 lower at USD 69.70/t, on Ice Futures.
The downward moves were in line with losses in the related gas market, with the front-month Dutch TTF contract seen last down EUR 0.69 at EUR 12.02/MWh – its lowest in more than a fortnight.
“Generally milder temperatures are forecast for next week across central western Europe, which will mean reduced electricity demand,” said a commodities analyst with a UK-based trading house.
Temperatures will rise to as much as 4C above seasonal norms this week and 3C higher than normal next week, according to forecaster SMHI.
Yet the market was also looking at growing regional supply, said a London-based coal trader, pointing to port stocks having risen to multi-month highs.
“Last week’s low Rhine level is a reason why ARA [Amsterdam, Rotterdam and Antwerp] inventories have gone up,” he said.
Levels at the Rhine’s main indication point, at Kaub, have dropped to below 100 centimetres, thereby limiting the amount of cargo carried by barges, and resulting in a “low-water surcharge” for customers.
But levels should recover to as much as 115cm over the coming days, according to official data.
“Rhine river levels have plunged, disrupting coal deliveries to power plants and thus swelling stocks at ports,” said an analyst with European energy firm.
Indeed, coal stocks at four key northwest European import terminals have risen to 7.1m tonnes – the highest since late May – with a source at one hub noting vessel arrivals continued to outstrip inventory withdrawals. (see Stocks section)
As a result, physical trading activity remained muted, said a London-based coal broker.
“It’s going to take forever to get shot of those stocks,” he said, noting there were only offers to be seen in early trading, with bids “hard to come by”.
The energy firm analyst also said lower freight rates were playing a role.
“Freight rates have finally given in, thus shedding the support for API 2,” she said.
The Baltic Dry Index (BDI) – which tracks global dry freight rates – was assessed last at a one-month low of 2,131 points.
From a technical standpoint, the Cal 20 API 2 contract faced some further losses over the coming days, said Montel’s head of technical analysis, Tom Høvik.
He added, however, the contract would likely remain within the USD 67.15-71.50/t range.
European coal terminal stock levels as of 23 September, obtained from the respective terminals (against previous week):
EMO (Rotterdam) – 3.7m tonnes (0.1m tonnes)
OBA (Amsterdam) – 2.7m tonnes (0.15m tonnes)
EBS (Rotterdam) – 0.425m tonnes (0.05m tonnes)
Ovet Vlissingen/Flushing – 0.28m tonnes (-0.03m tonnes)
Ovet Terneuzen – 0.26m tonnes (unchanged)