Euro Coal-Rebounds $2 on strong oil, gas

Mar 31, 2011 4:38pm GMT

* No fresh trades reported
* Bids, offers remain specific, blocking trade

LONDON, March 31 (Reuters) - Prompt European physical coal prices rebounded by around $2.00 on Thursday in line with stronger oil and gas prices.

Oil prices rose by over $2 on Thursday, touching $117.70 a barrel as Middle East supply worries led concerns [O/R].

Gas prices will stay under pressure for the balance of the year due to the amount of Liquified Natural Gas arriving in Europe but gas will also respond to rises in the general energy complex, as was the case on Thursday, traders said.

Both bids and offers were again very specific with certain origins and ports only.

"You have to wonder if anybody wants to actually trade or are they putting numbers out there which they know aren't going to be hit," one trader said.

End-user demand in Europe has been limited this week and tends to be so at this time of year as utilities begin switching into gas from coal-fired generation.

But there are so many opposing factors operating on coal prices at present that a lack of demand alone is not enough to pull coal lower, traders said.

Fundamental oversupply in the Atlantic and the Pacific (until Japan starts buying again) ought to trim FOB Newcastle spot prices and pull down FOB Richards Bay South African prices, traders and utilities said, but losses could be reversed by factors which have nothing to do with physical supply and demand.

"We're not super-bearish but it's normal for prices to drift a bit lower at this time of the year and I don't see a large number of end-user sellers out there," one large European trader said.

"The dollar could move sharply, oil could spike again - and gas is actually stronger today despite all the LNG coming to Europe," he added.

"Go figure, there are all these bearish LNG stories and the market's rallied more than $1.50 on the back of oil," another European trader said.

Two lines were closed by a derailment on Wednesday on the railway to Richards Bay Coal Terminal but the tonnage lost was unknown, industry sources said.

Rail operator Transnet Freight Rail said one of the closed lines will reopen on Friday.

A series of derailments resulted in a loss of around 3 million tonnes in December-February, exporter sources said.

South African coal has been predominantly shipped to Asia rather than Europe so the tonnage lost would tighten supply there, if anywhere, traders said.

TRADES
Two June loading Newcastle parcels traded at $119.25 a tonne on globalCOAL, down $1.00.
A June delivery DES ARA cargo traded at $125.05 a tonne via brokers, also down $1.00.

PRICES
A June delivery ARA cargo was bid at $127.25 and offered at $127.50, up $2.00.
A May DES ARA cargo was bid at $126.75 and offered earlier at $126.50, up nearly $2.00.

There had been a June ARA bid earlier on Thursday at $127.50 a tonne for 50,000 tonnes of South African only.

A May loading South African cargo was bid at $121.00 and offered at $121.75, up $2.00.

A June cargo was bid at $119.00, unchanged.

(Reporting by Jackie Cowhig)