Friday, 30 November 2012 03:12
LONDON: Physical coal prices for delivery early next year were little unchanged on Thursday as traders shrugged off news of possible supply disruptions in Australia and digested further evidence of production cuts.
South African cargoes for delivery in February traded at $90.25, up $0.25 since Wednesday, while coal for delivery into Amsterdam/Rotterdam/Antwerp (DES ARA) traded at $93.10 a tonne for the February contract, was up $0.10 from Wednesday's settlement.
A train derailment between Australia's coal-rich Hunter Valley and Newcastle port, a busy export terminal, was reported on Thursday.
If the accident causes longer-term disruption to supply, then Australian coal prices could rise following months of downward pressure due to oversupply, industry sources in Australia said.
Australia's Rail Track Corporation said initial indications showed significant damage had been caused and could not forecast when the line would be reopened.
Even though Europe imports little Australian coal, any meaningful disruption to supply from the country could impact prices paid for South African coal shipped to Europe, one London-based analyst said.
"A disruption of few days wouldn't be felt, but if it was to be sustained, then there might be a rise in demand for South Africa-origin coal," he said.
Meanwhile, rising costs for mining coal and weak prices are taking an increasing toll on Indonesian supply, the Indonesian Coal Mining Association said on Thursday.
Indonesia's coal output will likely drop 30 percent to 340 million tonnes this year as a result of tough market conditions, it added, pointing to recent cancellations of coal cargoes by Chinese buyers.
A lack of price movement in the physical market was also evident in the coal swaps market where the API2 2013 contract rose $0.30 to $96.75. This was despite a bearish signal sent out by German power prices, which extended a 2.5-year low in the German 2013 forward power contract, falling to 46.00 euros/MWh amid weaker energy prices and the lower cost of emissions permits.
The API2 2013 contract is almost 30 percent below its most recent peak in the third quarter of 2011 as demand from China flags and plentiful exports from the U.S and Latin America.
Cheap shale gas has displaced coal in many of the country's power plants, but a recent rise in US gas prices with the onset of the North American winter could mean less is shipped to Europe in 2013, the analyst added.
European power stations have been voracious consumers of coal this year because for them the fuel is far cheaper than burning gas, in marked contrast to generation spreads across the Atlantic.
UK coal-fired power generation was 40 percent higher in the first nine months of 2012 compared to a year earlier, government figures showed on Thursday.
Copyright Reuters, 2012