European thermal coal prices fell to their lowest level since September as the continent’s mild winter sapped demand for the commodity.
According to an FT report on February 11, he benchmark European swaps contract for March declined by 0.7 per cent to a four-month low of $77.50, also knocked by talk of a European utility company looking to offload some of its thermal coal stockpile.
Since a recent peak in October, European thermal coal prices have declined by more almost 13 per cent as mild, wet weather has hit appetite for coal. "Power plant stocks were already high in November and December,” said Macquarie analyst Stefan Ljubisavljevic. "And because of the mild winter weather will remain at levels that can be described as very comfortable.” At the same time as demand has remained weak, increasing amounts of South African coal has been pushed into Europe. This is because of slack demand from India, South African’s biggest customer. "Pacific buying isn’t happening either,” added Mr Ljubisavljevic. "That’s seeing a lot of South African coal come back into the Atlantic market.”
Meanwhile, the benchmark South African swaps contract for March fell 0.6 per cent to a near four-month low of $77.95. Data released earlier this week by the Ore Team, a research house, showed Indian coal imports of just 9.2m tonnes in January, down from 13.1m tonnes in December. Of that figure, thermal coal imports totalled 6.9m tonnes.
India depends on thermal coal to generate almost 60 per cent of its electricity and has become increasingly dependent on imports because of weak domestic output. Coal India, the country’s biggest producer, has repeatedly failed to hit production targets because of problems with infrastructure and obtaining environmental permits. But the sharp deterioration in India’s currency is threatening to reduce the affordability of coal imports, posing a potentially significant problem for the seaborne market, according to analysts. Morgan Stanley estimates India was second only to China in terms of absolute growth in imports in 2013.
Traders in London said Chinese buyers had yet to return to the market after the lunar new year holiday – placing further pressure on thermal coal prices. This slew of bearish factors has cancelled out any benefit that might have been expected from lower exports from Colombia. Colombia is one of the world’s biggest producers of seaborne thermal coal and a key supplier to Europe. But environmental rules have forced several miners to halt production because they cannot comply with new regulations for port operations.
