(Montel) European coal prices are set to retreat this month as an abundance of supply is met with waning Chinese import demand and flagging trading activity in the Atlantic basin, participants said on Monday.
“I expect downside risk ahead,” said Diana Bacila, senior analyst at Oslo-based Nena, citing an anticipated rise in Chinese domestic production, which will alleviate the country’s import requirements.
China’s National Development and Reform Commission (NDRC) has urged miners to raise production and improve supply logistics to plants, in an effort to replenish stocks ahead of winter.
Bacila noted the prospect of improving supply from key exporting nations such as South Africa and Russia, but she pointed out that “the start of rainy seasons places some risk over Indonesia and Colombia’s coal exports”.
Elsewhere, Australia’s coal exports could step up as miners there return to work following three months of strikes at Glencore-owned mines.
According to Glencore spokesman Allyn Hamonet, miners at the firm’s 6m tonnes/year Ulan West underground mine, in central west New South Wales, have voted to accept a new employment agreement.
“I think the market is speculating that this is more likely for the other sites too,” said an analyst with a European utility.
Last month, the API 2 fourth-quarter contract ended at USD 87.05/t, up 3% from August’s close, while the front year contract finished down 0.3% at USD 77.26/t – despite hitting a 3.5-year high of USD 84.25/t in mid-September.
The gains had been driven largely by a sharp rise for the equivalent Asia-Pacific benchmark Newcastle contract, which reached a four-year high of USD 88.15/t. It closed the month 4.7% lower at USD 83.99/t.
On the physical market, the Global Coal Des ARA index was assessed on the last trading day in September at USD 90.89/t, up 2% month on month.
Atlantic calm
In the Atlantic basin, there was little sign of any notable support for the coming month.
“We’re not yet at the beginning of the winter, so there will be no significant demand yet,” the analyst said.
Despite the price highs seen last month, European physical trading activity ground to a virtual halt, with no cargoes for delivery in Amsterdam or Rotterdam trading via broker Global Coal, compared with 46 in the same month last year.
This in part reflected the fact that combined stocks at four key European dry bulk terminals were 18% higher on the year at the end of the month, at 4.58m tonnes, Montel data showed.
From a technical viewpoint, the Cal 18 API 2 contract faced a bearish outlook this month, said Tom Høvik, head of Montel’s technical analysis services.
Reporting by:
Laurence Walker
laurence@montel.no
13:47, Monday, 2 October 2017