According to Mr Karim Kanji Barclays Capital head of coal and dry freight trading has said at the Coaltrans the euro dollar exchange rates have been keys to recent falls in the API 2 derivatives market. Calendar 2012 prices on API 2 have slipped in recent weeks mirroring the euro's fall against the dollar.
He said that there has also been strong correlation between the front-month Brent crude contract and the calendar 2012 coal contract, as these are the two largest global energy supply sources. The correlation between crude and coal disconnected during the “Arab Spring”, when crude prices rocketed, but have been close for the rest of this year.
Mr Kanji said there is also a strong correlation between the calendar 2012 summer months and the NBP gas summer 2012 contract as rival energy sources. Mr Kanji expects volatility in the market to pick up after a slow summer where volatility dropped to just 5pc because of seasonal factors such as low demand. Implied freight prices are at a premium to actual freight rates showing that South African coal cannot price into Europe. Bankers are looking to Asian markets and at new prices indexes such as CFR south China to hedge their price exposure in Asia-Pacific.