COAL OUTLOOK – Rising demand set to buoy prices

(Montel) European coal prices may gather some further strength this week, as an anticipated rise in seasonal demand, in both the Atlantic and Pacific basins, offsets so far lethargic physical trading activity, participants said on Monday.

The front-quarter API 2 contract traded last at USD 87.95/t, up 1.3% on the week but a marginal USD 0.30 lower than Friday’s close, on Ice Futures.

Likewise, the Cal 18 was 1.7% higher from a week ago, but USD 0.16 softer from the previous close, at USD 85/t.

On the physical market, the Global Coal Des ARA index was assessed last at six-week low of USD 90.95/t, down 2.7% week on week.

“Import demand from Far East buyers should be strong on increased heating demand and tight supply in the Pacific,” said Diana Bacila, senior analyst at Oslo-based Nena, adding above normal rainfall in producing countries could also hinder exports.

“European coal demand is also seasonally picking up and import demand could be strong after a period with low Rhine river levels, which prevented [German plants from] restocking from ARA ports”.

High stocks
ARA, or Amsterdam, Rotterdam and Antwerp, coal stocks were last pegged around 40% higher than at the same time last year, at more than 5m tonnes.

While seaborne vessel arrivals were at relatively low levels, barge loadings from stocks – for onward shipment to German plants – were also limited, said a source at a large dry bulk terminal.

This was reflected in physical trading activity, with just two cargoes for delivery in northwest Europe having traded via broker Global Coal so far this month.

“A quiet end to [last] week saw another day of limited physical interest,” said a coal broker, in a note.

From a technical viewpoint, the Cal 18 API 2 contract could head up towards the USD 87/t mark this week, said Tom Høvik, head of Montel’s technical analysis services.

“After breaking above USD 84.20/t on Friday, the market has [reversed] its three or four-week bearish trend structure,” he said.

“This bullish structure does not say the market should go directly higher, but it does say we can expect higher lows and higher highs.”

Prices & Spreads

Stocks
European port coal stock levels as of 27 November, obtained from the respective terminals (against previous week):
EMO (Rotterdam) – 2.9m tonnes (unchanged)
OBA (Amsterdam) – 2m tonnes (+0.1m tonnes)
EBS (Rotterdam) – To be added later
Ovet Vlissingen/Flushing – 0.35m tonnes (-0.085m tonnes)
Ovet Terneuzen – 0.08m tonnes (-0.02m tonnes)