The Cal 16 contract last traded at USD 57.50/t, up 2.4% from Friday's close, according to Ice data. The Q3 API 2 contract was last pegged at around USD 57.80/t, up by around USD 1.15 from Friday’s close.
This week’s gains are a result of a “mix of positive drivers” impacting the Atlantic supply and demand balance, Diana Bacila, coal analyst with Oslo-based Nena, told Montel.
“On the supply side, higher oil prices and a stronger ruble against the dollar are squeezing Russian miners’ profit margins, limiting their ability to flood the European market as seen over the last months,” said Bacila.
“From a demand perspective, a small rise in freight rates, stronger coal consumption in Europe, especially in Germany and Spain, and a stronger euro versus the dollar have been bullish drivers to API 2 prices.”
Aided by rising crude prices, the Russian currency traded below 50 rubles a dollar for the first time since November, with the rate last seen at RUB 50.03. Meanwhile, the euro has gained by up to 5 cents against the dollar this week, with the common currency last trading up about 0.4% at USD 1.072.
Front-month Brent crude futures last traded at USD 62.88/bbl, up from a close of USD 56.69 on 8 April.
Output
With coal prices remaining around 10-year lows, producers could “finally” be approaching a level where they have to significantly slash output, offering the potential for further price rises, a Nordic-based trader told Montel
“The market has been waiting for [production cuts], so, even though there are concerns over weak Chinese demand, if we start seeing some real drops in output, it could outset China and the market could bottom out.”
However, the API 2 price will likely remain “highly volatile”, reflecting changes in the oil prices, currency markets and freight rates, said Bacila.
“Compared to what we have seen in Q4 14 and Q1 15, the current appreciation of the ruble and Colombian Peso against the dollar, along with higher oil prices, have lifted the FOB [free-on-board] cash cost levels for Europe’s base coal suppliers, Russia and Colombia,” said Bacila.
But, fundamentally, European coal prices could test further lower levels, as Chinese coal demand remains subdued and El Nino’s persistence in 2015 limits risks of coal supply disruptions globally.”
Reporting by:
James Allen
james@montel.no
17:54, Thursday, 16 April 2015