Euro Coal-Prices dip despite oil steadying

Sunday, Dec11, 2011

* Danube water levels rise
* Japanese start term contract talks

LONDON (Reuters) - Physical prompt coal prices dipped slightly on Friday after a week of limited activity which left coal tracking oil and currencies while fundamentals took a back seat.

Oil prices steadied at around $108 on Friday after the euro zone agreed closer fiscal union to save its currency.

Coal trading activity has already fallen off considerably ahead of the Christmas and New Year holidays - both end-users and suppliers have squared their books and have little appetite for new business, traders and utilities said.

Aside from some Indian tenders for supply through 2012, there has been little evidence of consumer buying interest this week in either Europe or Asia.

Water levels on Germany's Danube river have recovered to levels which allow fully-loaded barges to sail but unless there is an unexpectedly harsh winter, utilities said they are unlikely to buy more spot coal in December and January .

China, the key spot buyer this year, is still enquiring for prompt cargoes but new deals are not being done.

Stockpiles remain high at Chinese ports and there is a lot of wrangling between suppliers and importers over who pays the hefty demurrage costs for vessels forced to wait before discharging cargo, suppliers said.

Chinese thermal coal inventories are currently around 16 days and utilities are not in urgent need of supply .

Australian coal prices FOB Newcastle have remained flat at around $111 a tonne and are likely to remain at that level or drift slightly lower over the holiday period.

Negotiations between Japanese utilities and Australian suppliers for term contracts have already begun and suppliers are in no rush to settle because spot prices are $20 below the current 2011 contract price which was a record $129.85.

"A lot of people are already on holiday and that's reflected in the lack of bids and offers in Europe. The market's looking rather weak in the Atlantic and Pacific, it's been supported by oil and little else recently," one major European trader said.

"Chinese buyers are still enquiring and there is still some buying taking place," another trader said.

PRICES

A January loading South African cargo was bid at $101.50 and offered at $102.75, down 50 cents on the offer. A February South African cargo was bid at $100.00 and offered at $102.75, down $1.00 on the bid. A January delivery DES ARA cargo was offered at $110.50, down $1.00. A February DES ARA cargo was bid at $111.25 and offered at $111.75, down 25 cents.

(sourced Reuters)