Ample supply may pressure European coal prices further

European coal prices look set to lose further ground this week amid a relative abundance of supply and sluggish demand but the market has retained some technical support.

The front-month API 2 contract was last seen down USD 1.25 on the previous settlement at USD 118/t, on Ice Futures. But the contract was still 6% higher on the month.

A portfolio manager with a German energy company said the recent gains had been mainly technical, with supply largely sufficient to meet demand.

“We’ve had a massive upward trend and the market seems to want to go higher but fundamentally speaking, we remain weak,” he said.

Tepid demand
While there were some ongoing concerns about tighter US supply – due to a bridge collapse last month at the country’s second-largest coal hub in Baltimore that halted exports – and rising Asian demand, European demand was tepid, he said.

For example, German coal-fired generation last week – although 15% higher on the week, at 310 GWh – was the second-lowest week for generation this year, with the year-to-date burn also more than 40% below the same period last year, he said.

And even from a technical standpoint, prices would struggle to edge much higher in the near term, said Tom Hovik, Montel’s head of technical analysis.

The front-month contact could lose some further ground over the coming days, potentially reaching as low as USD 111-114/t, before maybe returning to the USD 120s later in the month, he said.

Russian supply
Adding to regional supply, Kpler data showed that Russian exports via the Suez Canal to Asia dropped by almost half last month from February to 1.2m tonnes – and had only totalled 0.22m tonnes so far this month – as Pacific basin buyers took less Russian coal amid concerns of incurring secondary US sanctions.

“With China and India buying less Russian coal, there are going to be less shipments [out of the Atlantic basin],” said a London-based analyst with a shipbroking firm.

Although EU countries have banned Russian coal since mid-2022, due to the war in Ukraine, other regional buyers in north Africa and Turkey – which often compete with northwest European for supply – could take more of the fuel from Russia.

Stocks at key Amsterdam, Rotterdam and Antwerp (ARA) import terminals were seen last week at 5.57m tonnes, which was only marginally higher than the previous week’s year-to-date low of 5.52m tonnes, according to Montel estimates.

European coal terminal stocks:

Edited by: Laurence Walker