21-11-2018

Coal prices to extend multi-month lows

European coal prices may extend multi-month lows this week as severe restrictions on Chinese imports sent shockwaves across the seaborne market, exacerbating the impact of high European stocks and plunging gas prices, participants said on Monday.

The API 2 front-quarter contract traded last down USD 1.60 from Friday’s close at USD 83.75/t – its lowest since mid-April – while the front year was USD 1.03 lower at USD 84/t, on Ice Futures.

The latter contract earlier reached its lowest since early May of USD 83.75/t.

On the physical market, the Global Coal Des ARA index was down nearly 10% on the week, at USD 87.92/t.

Participants pointed to the bearish impact on international coal prices of China effectively halting coal imports until the end of the year.

Montel reported earlier the world’s largest coal consumer will not permit any more imported coal for customs clearance until January, to keep import levels below 2017’s record 271m tonnes.

“China is certainly playing the major role,” said a coal analyst with a European trading firm, adding, however, high stock levels at Amsterdam, Rotterdam and Antwerp (ARA) dry bulk terminals were also weighing on API 2 prices.

High stocks
Inventories remain at around 1m tonnes above levels recorded at the same time last year, of 6.8m tonnes, as low river levels continue to hinder barge movements to inland coal-fired plants predominantly in Germany.

“The outlook for ongoing low precipitation is [therefore] bearish too,” the analyst said, adding weak oil and competing gas prices were also a driving factor.

“Overall, the market is quite bearish, especially looking at gas today,” said another coal analyst, with a Nordic energy firm.

The Dutch TTF front-month contract changed hands last down 6% from Friday’s close, at EUR 24.43/MWh, on Ice Endex,

From a technical viewpoint, the outlook for the Cal 19 contract was bearish for the foreseeable future, after breaking below the USD 84.25/t support level, said Montel’s head of analysis Tom Høvik.
Source: Montel

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