LONDON: European coal prices rose for a third day in a row on Friday, and a key benchmark futures contract hit a five-week high as traders said demand from utilities was strong.
Coal prices for delivery in January at Amsterdam/Rotterdam/Antwerp (DES ARA) traded at $92.50 a tonne at 1645 GMT, up 90 cents from the previous close of $91.60, according to figures from brokers.
South African cargoes for delivery in January were trading at $89.00 a tonne, up $1.50 from where they settled on Thursday.
Traders said the rise in prices was largely a result of buying by utilities amid a perceived tightness at the front end of the curve.
"Coal-fired power stations in Europe are running flat out, and over the last few weeks the fall in coal prices was probably a bit overdone," said one trader.
Earlier this week, German utility RWE said it had increased power generation from coal by 11 percent so far this year, largely because burning the fossil fuel in power stations and buying the necessary carbon permits has been cheaper than using natural gas.
But some of the buying this week was motivated by the need to cover forward paper contracts rather than an overwhelming need for more physical coal, according to some market players.
Barclays said in a note on Friday that coal's gain this week was likely to have been due to a mixture of a technical bounce and short-covering and that fundamentals were largely unchanged.
Rising freight rates "may have offered producers the opportunity to adjust product prices, potentially contributing to some support for prices", it added.
However the demand picture among the main importing nations for coal "remains uninspiring", the report said.
In the coal futures market, the API2 2013 coal swaps contract rose to $96.60 a tonne, up 0.7 percent from the previous close and its highest trade since Oct. 9.
But prices still are down 17 percent from a year ago amid plentiful supply from supplier countries such as Australia and Colombia.
European benchmark gas prices fell slightly on Friday, with contracts for delivery next summer on Britain's National Balancing Point (NBP) gas hub trading at 62.45 pence per therm, down 15 cents on the previous close.
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