Euro coal dips as China holiday hits demand

Wednesday, 25 Jan 2012

Reuters quoted traders and utilities said prompt European physical coal prices dipped by around 50 cents on Monday as the absence of Chinese players due to the New Year holiday began to be felt.

They said minimal European demand and a hiatus in Chinese buying should be strong enough factors to pull DES ARA European prices below the support level of USD 100 a tonne during the next two weeks from USD 105 currently.

Traders said oil strength is expected to limit coal potential to fall due to weak fundamentals but with key buyers out of the market some further price falls were highly likely in the very near term.

Firm oil prices mostly due to supply concerns have masked the effect of poor coal fundamentals. Oil retreated on Wednesday as optimism, spurred by talk the IMF may do more to help resolve the European debt crisis, proved shortlived with a gloomy demand outlook pressuring prices.

The FOB benchmarks for South African and Australian coal have been more robust. South African prompt cargoes have been bid higher by players counting on resumption soon of Chinese buying while Newcastle prices tend to be resilient while annual contracts with end-users are being negotiated.

Traders said coal API2 and API4 swaps saw the quietest trading day of the year so far.

One European trader said "Swaps have done almost nothing a lot of people are not around by 0930 GMT only one trade had taken place."

A utility source said "Today is the first day of the Chinese New Year and the buyers there are totally absent, won't be back for two weeks so that taken some support away from prices."

He added that "A few aggressive players are bidding up South African prompt cargoes in the hope that Asian buying will return after the New Year but European demand looks appalling."

(Sourced from Reuters)