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Supply shortage threat boosts coal prices

World Coal,

Thomson Reuters Point Carbon has released its latest cross-commodity scorecard, with coal prices still being affected by Drummond’s coal export ban.

After a level start to the week with API2 frontyear prices remaining on the US$ 81.90/t level, the contract increased on Wednesday. This was largely due to the continued threat of supply shortages in the European market as US coal miner Drummond’s ban from Colombian exports continued to lift the market. The end of the week saw a rangebound session with traders reassessing the supply situation.

The Drummond situation is expected to continue driving prices this week, however the European market looks well stocked for H2 2014, due to mild witer conditions and plentiful supply from South Africa. Despite this, for the first two quarters of the year, European utilities will have to compensate for the reduced Colombian exports. Thomson Reuters Point Carbon expects this to cause additional bullishness in the coal market this week.

EUA prices rallied last week following the easing of fears over the distribution of free allocation, cautious optimism over a faster implementation of the backloading plan, as well as technical buying. The Dec-14 contract rose steadily throughout the week, testing key resistance levels at €5.16/t towards the end of the week.

Price developments this week will continue to be driven by political events, as investors consider whether the backloading proposal will get a shorter scrutiny period as well as the release of EU 2030 policy framework documents and EU ETS structural reform proposal on 22nd January.

Adapted from press release by Katie Woodward

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