Oversupplied Atlantic coal faces near-term pressure
European coal prices faced further losses this week amid a lingering glut of supply, although the market could garner some support from related energy markets and technical signals, participants said.
The API 2 front-month contract traded last down USD 0.20 on Ice Futures to USD 59.50/t, while the front year was flat at USD 68.50/t.
The front month has shed 3% over the past week, with pressure coming from oversupply as well as seasonally weak demand and softer freight rates.
Last Monday, the Baltic Dry Index, a gauge for global dry freight rates, reached its highest since late 2013 – at 2,191 points – adding to the delivered cost of coal. But it has since declined to below 1,937 points.
“In the Atlantic basin, bearish fundamentals have dragged values back down to a slightly more realistic level,” said a coal broker, pointing to still high stocks at Amsterdam, Rotterdam and Antwerp (ARA) dry bulk terminals.
And four coal-laden vessels were scheduled to arrive at Rotterdam’s key EMO dry bulk terminal this week, port data showed.
Yet forecasts of rising river levels raised the potential of some further stock erosion, after low waters last week meant barge operators had to reduce some coal cargoes by nearly half, participants said.
The main waterway indication point at Kaub, on the Rhine, is forecast to rise to more than 200 centimetres by mid-week, from below 130 centimetres over the weekend.
“There was quite a lot of rain in the Alps over the weekend and temperatures also look quite moderate,” said a commodities analyst with a London trading firm.
“Some nuclear curtailments in France and Germany, due to high river temperatures, have now been cancelled,” he added.
A heatwave across Europe last week triggered heightened power demand for cooling systems, with outages at several plants further raising the likelihood of an increased call on coal-fired units.
From a technical standpoint, Tom Høvik, head of technical analysis at Montel, said the Cal 20 contract faced some further losses in the near-term.
“But as long as the USD 67.15-66.50/t support level holds its ground, the market will probably climb back to USD 70-71/t again later this week,” he added.