Euro Coal-Prices dip, Aug ARA trades at $124.25/T

Jun10, 2011 4:15pm GMT

* China buys more discounted Australian
* Coal stays robust despite oil price fall

LONDON, June 10 (Reuters) - Coal prices were 75 cents to $1.50 lower on Friday after a $3 fall in oil and amid a lack of demand for standard-grade coal, particularly in Europe.

Physical coal prices will have to fall by $5-10 a tonne before buyers in Asia or Europe will be drawn back to the market, traders said, but so far the resilience of coal swaps values has prevented physical prices from falling more steeply.

Coal swaps have traded at a premium of a few dollars to physical for several weeks, boosted by strong oil.

Swaps have not reflected the market's fundamental weakness, because they have been influenced more by moves in other markets, but the persistence of prices several dollars above levels at which any buyer is prepared to buy is blocking trade, said utilities, traders and producers.

"Swaps and physical aren't talking to one another. The question is how long can this disconnection continue before something gives?" one utility source said.

UK gas and power prices rose on Friday as low flows from Norway intensified Britain's reliance on liquefied natural gas and high coal prices bolstered gas forward prices.

Stockpiles of coal in Amsterdam-Rotterdam-Antwerp are fairly high, as are stocks at power plants. More cargoes of U.S. and Colombian coal are due to arrive in July, which utilities say they do not need.

In Asia, the outlook for prompt buying of standard-grade physical coal is similarly grim.

China has been buying Australian coal at discounted prices since the tsunami hit Japan earlier this year, and some of this coal has been standard-grade Newcastle described as off-specification material.

Some higher-priced sales of standard-grade, higher energy content Russian and Indonesian cargoes have been made into China recently, but these are a small proportion of the predominantly low-grade, discounted cargoes sold, suppliers said.

India, South Korea and other Asian end-users have also been focussing on the lower-grade, lowest-priced coal origins for months.

Until South African and Newcastle prices drop closer to $100 a tonne, key Asian end-users will avoid this coal whenever possible, suppliers said.

TRADES

Two August delivery DES ARA cargoes traded at $124.25 and $124.75 a tonne, down 75 and 25 cents.

PRICES

A July South African cargo was offered at $119.00, down 75 cents.

An August loading South African cargo was bid at $119.25 and offered at $122.00, up $1.00 on the offer but slightly lower on the bid.

A July DES cargo was both bid and offered at $123.50, down $1.50.
(Reporting by Jackie Cowhig, editing by Jane Baird, sourced Thomson Reuters)