COAL OUTLOOK – Prices jump 20% amid conflict fears

(Montel) European coal prices jumped sharply in early Monday trading, driven by initial gains in the gas markets coupled with concerns of still-tightening supply amid Russia’s continuing invasion of Ukraine.

The front-month API 2 contact was seen last up USD 35 from Friday’s settlement at USD 252/t, while the front quarter surged USD 36.17 to USD 218/t, on Ice Futures.

An energy analyst with a UK-based investment firm said coal was likely both tracking competing gas prices higher and drawing continued support from its own tight supply fundamentals.

“There are [also] some proposals to de-mothball coal plants across Europe, which could boost coal demand,” he added.

European gas prices surged in early Monday trading as Russia continued its invasion of Ukraine, further inflaming market concerns of disruptions to exports.

“I’ve not seen any major changes in [gas market] fundamentals,” the analyst said. “I guess the move is driven by the escalation of the conflict over the weekend and concerns about future disruptions to energy flows.”

A coal trader with a transatlantic supplier also cited gas as the primary driver for API 2 prices in the current session, with coal-market tightness already well-established.

But the trader noted gas prices had already retreated 20% from highs earlier in the session.

Stock increase

Meanwhile, stocks at four key Amsterdam, Rotterdam and Antwerp terminals this week rose marginally from last week’s multi-year lows of just 2.64m tonnes, to 2.78m tonnes.

Import terminal sources said the conflict with Russia had not yet affected deliveries to Europe.

“So far, no nominations or vessels which are underway have been cancelled yet,” said one source, while another echoed, “So far, no impact”.

“We have to wait another month to see the impact of the war [on Russian coal deliveries],” said the trader with a transatlantic supplier.

Poland may cut Russia purchases

Already, Danish energy firm Orsted has stopped buying Russian coal, and a Polish coal-trading source said Poland may follow suit.

“I expected most of the coal buyers in Europe will do the same,” the Polish trader said.

Northwest Europe would likely import 7.3m tonnes of thermal coal – from all origins, by sea – this month, up from just 6.9m tonnes in January and well above February 2021’s 4.5m tonnes, according to preliminary forecasts by dry bulk data provider DBX.