Steam coal prices rise on weekend on short covering

Monday, 09 Jan 2012

Reuters reported that prompt physical coal prices rose by 50-75 US cents a tonne on Friday as players covered short positions and Indian buying showed signs of picking up after several months of a lull.

Traders and utilities in Europe short of Colombian tonnes due to delays to shipments from two of the country biggest exporters, Drummond and Prodeco have been seeking replacement cargoes helping to bolster DES ARA prices.

Suppliers said the gap between South African physical prices and API4 coal swaps has narrowed substantially, enough to tempt Indian trade buyers back into the market.

Traders and utilities said South African coal supply for January is extremely tight, exporters. Almost nothing is available now for January and shrinking volumes for February.

They said the unusually high size of this prompt bid a bid or offer for more than a cape worth is almost unheard of versus the offer for only part of the tonnage sought is the best visible indicator of the market tightening.

Indian cement and sponge iron makers have this week bought several prompt South African cargoes and are seeking more, but the power sector is still squeezed between fixed electricity tariffs, strong coal prices and the weak rupee.

(Sourced from Reuters)