COAL OUTLOOK – Market eyes new price highs

(Montel) European coal prices look set to make further gains this week, after hitting a new high of USD 500/t in early Monday trading, as concerns of dwindling Russian vessel arrivals triggered increasingly aggressive bidding activity.

The front-month API 2 contact was seen last up USD 61.25 from Friday’s settlement at USD 485/t, while the front quarter soared USD 91.30 to USD 500/t – its highest on record – on Ice Futures.

The latter contract has surged more than three-fold in value since Russia’s invasion of Ukraine on 22 February.

Prices could conceivably rise much higher over the coming days, as buyers vie for limited global spot supply, said a coal analyst with a large trading house.

A commodities analyst with a UK investment firm said the wider market fundamentals had not changed from last week, with supply concerns at the fore.

Traders fear Russia’s escalating war with Ukraine will lead to further export constraints – amid an already tight market – due to a possible ban on shipments to Europe, more restrictions on Black Sea traffic or shipping firms and ports refusing to handle Russian-origin coal, Montel reported earlier.

Russia – which is Europe’s main provider of imported thermal coal – would likely export just 8.4m tonnes by sea to all global destinations this month, compared with more than 15m tonnes in the same month last year, according to preliminary forecasts by dry bulk data provider DBX.

Declining stocks

At the same time, stocks at four key Amsterdam, Rotterdam and Antwerp terminals this week eased by a marginal 2% to 2.73m tonnes – well below levels of 3.4m tonnes at the same time last year but slightly above last month’s multi-year lows of just 2.64m tonnes.

As such, European utilities have been seeking alternative-origin material from afar afield as South Africa, Indonesia and Australia.

“This will support exports from Richards Bay,” said a Johannesburg coal trader, regarding the country’s main coal export hub, at Richards Bay port.

He noted while much of South Africa’s produce was currently below European specifications, they could increase quality and volumes to Europe, should prices remain at over USD 150/t for a prolonged period.

From a technical viewpoint, Montel’s head of technical analysis Tom Hovik said the market would likely remain bullish this week.

“With the current strong, bullish momentum one cannot rule out that the USD 600/t level can be experienced [this week],” he said.