The Coal Trader

Coal News for Mining & Investing Professionals

Coal Prices rebound in Europe but oversupply to cap gains

European coal prices jumped to two-week highs in early Monday trading, piggybacking on gas market gains and amid some technical support but oversupply was expected to cap any increases.

The front-month API 2 contract was last seen up USD 3.75 on the previous settlement at USD 97.15/t, on Ice Futures, its highest since 8 February.

“Prices have bounced as they’re already down to a low level but demand is not exactly thriving at the moment,” said a coal broker.

“There are plenty of stocks and if anything the outlook is potentially for people to reload and re-export tonnages out of ARA to places like the Mediterranean or Turkey,” he said.

Already, coal stocks at Amsterdam, Rotterdam and Antwerp (ARA) last week slipped from an eight-month high of 6.39m tonnes in the previous week, to 6.1m tonnes, Montel estimates showed, with early indications of even lower levels this week.

“People are bleeding down stocks and not really needing to replenish,” the broker said.

A source at one large ARA coal import hub also said there had been a slowdown in coal-laden vessel arrivals. Indeed, thermal coal imports to northwest Europe were seen dropping to 2.9m tonnes this month, from 3.8m tonnes in January, according to provisional DBX projections.

No concerns:
Even recent reports of suppliers in Colombia – one of Europe’s main thermal coal origins – agreeing to sell up to 10m tonnes of coal to China were failing to spook the market.

“If it’s just going to reduce the oversupply, it doesn’t necessarily mean it will bring any price support this year,” said a coal trader with a Swiss energy firm, adding it would only be an issue if the market suddenly became tight, for example due to a major gas supply disruption.

“But the expectation for Europe this year is that [coal] imports could drop by 40% compared to last year, and last year they dropped by 40% as well, so demand is not going to be there.”

Europe’s thermal coal imports could slide from around 48m tonnes in 2023 to 35-40m tonnes this year, Montel reported last week. From a technical standpoint, the front-month API 2 contract could still see some further gains, said Montel’s head of analysis, Tom Hovik.

“If the market manages to close above the quite important USD 96.50/t level, a direct buy signal will enter the scene,” he said, noting it could result in prices returning to more than USD 100/t over the coming days.

By: Laurence Walker