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European coal spot prices fall to five-year low

World Coal,

Thomson Reuters has released its regular Inside Dry Freight newsletter, detailing that European spot prices for coal have fallen to a five-year low.

European spot coal prices fell to a five-year low on Thursday as weak demand for energy across Europe caused other energy markets to drop to multi-year lows." Coal had to drop today as power and gas prices also fell to multi-year lows and even oil dipped," one coal trader said.

Cargoes for June delivery to Amsterdam, Rotterdam and Antwerp (ARA) fell by SU$ 1.25 to trade at US$ 70.15/t, according to data on the GLOBALcoal trading platform.

Spot prices for coal have not traded this low in Europe since October 2009 and the contract price is 45% below its last peak in Q1 2011.

Physical coal prices have been decreasing steadily over the past few months because of reduced energy demand across Europe due to milder temperatures and a global oversupply of coal.

As prices for natural gas have also dipped, further pressure has been placed on coal prices.

“At these levels, a lot of producers will struggle to make a profit, so you may see some mines being knocked out, though the Colombians, in particular, seem to still have some margin,” the trader continued.

Analysts at Societe Generale said more demand and less supply was needed to support prices.

“We still expect global thermal coal export capacity in 2014.15 to exceed demand slightly, causing the market to remain oversupplied,” they said in a research note.

“The situation should improve further in 2015, when demand from Asia, primarily India and China, has the potential to act as a primary catalyst in hastening the reduction of current oversupply,” the company said.

Adapted from press release by Sam Dodson

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