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Coal prices down in first week of 2014

World Coal,

Thomson Reuters Point Carbon has released its latest cross-commodity scorecard, with coal and carbon prices dipping in the first week of the new year.

After briefly halting between 27th and 31st December, the frontyear API2 coal contract continued its recent dip with the beginning of the new year on easing concerns about the supply situation in Colombia. At the end of last week, the Cal’15 contract fell below the US$ 81/t level amid a weaker euro against the dollar, and expectations about plentiful supply from the Atlantic.

Thomson Reuters expects to see some support around the current price level of US$ 80.69/t. However, the exemption for Drummond to avoid the export ban, combined with an oversupplied European market, suggests further bearishness in the week ahead.

After a bullish Christmas Eve, where the EUA Dec-14 contract closed above the €5/t level, the bellwether contract remained stable in a thinly traded market until the last trading day of the year. On 31st December, the contract fell lower on profit taking, closing the year below the €5/t level. However, the end of last week saw further correction on expectations that free allocation will come to market.

Thomson Reuters expects the free allocation of EUAs to remain the main price driver for the beginning of this year. Countries accounting for 23% of all free allocation have been given the go ahead to hand out allowances. The Climate Change Committee will vote on the detailed backloading plan this week, which should limit the downside. Overall the view looks to remain neutral.

Adapted from press release by Katie Woodward

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