Wednesday, July 1, 2015

Heatwave pushes up European coal prices

European coal prices rose over the past week as a heatwave buoyed power demand, while Australian prices were pulled down due to slower purchases by key Asian importers. 

Meteorological data in Thomson Reuters Eikon showed aggregate average temperatures in Germany, France, Austria and Switzerland would reach 25 degrees Celsius on Wednesday, six degrees above the seasonal norm, and rise further to 29 degrees by Saturday to remain above the norm until mid-July. 

In Britain, temperatures are expected to be almost 8 degrees Celsius above the seasonal norm of 15.35 degrees on Wednesday and are likely to remain above the norm for at least a week. 

"Supply in the Atlantic remains relatively tight," brokerage Marex Spectron said in a note to clients. 

Physical coal cargoes for prompt delivery into Europe's main terminals at Amsterdam, Rotterdam and Antwerp last settled at $59.20 a tonne, the highest settlement since early May, while South African cargo prices bounced off a 2015 closing low of $58.20 a tonne reached on June 26 to $60.45 a tonne by the end of the month. 

The stronger physical prices also pushed up coal futures, with API2 2016 contracts rising to $60.40 a tonne, from a 2015 low of just above $55 touched in April. 

Traders said a heatwave that has hit most of Europe this week was pushing up power demand and fuel prices in the region. 

In the Pacific basin, however, slowing demand was weighing on prices. Australian physical coal prices weakened $1.7 a tonne since June 26, although at $61.15 a tonne for prompt cargoes from its Newcastle terminal they remained at a premium over South African and European benchmarks. 

Japan data showed the country's thermal coal imports fell over 15% between May 2014 and May 2015 to just under 6-million tonnes, most of which came from Australia. 

Australian government data published this week showed that it expected its 2015/16 thermal coal exports to be 201.7-million tonnes, up slightly from 200.8-million tonnes for 2014/2015. 

It also said that it expected average 2015 thermal coal prices of $68 a tonne, down $2 from its previous estimate.