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Coal and carbon prices bounce back

World Coal,

Thomson Reuters Point Carbon has released this week’s Cross Commodity Report.

The API-2 coal contract bounced back over the course of last week, due to supply disruption fears and profit taking after the recent bearishness. A railway line connecting Columbia’s main producer to its export terminal was blocked after a terrorist attack.

Support also came from utility buying, prompted by high dark spreads as well as bullish carbon and German power prices for most of the week. Coal saw a 3.7% week-on-week increase, with last traded price standing at US$ 83.80/t.

Thomson Reuters Point Carbon expects the recent rally to continue on supply fears for Q1 2014, although it may lose some strength. This week’s price development will depend largely on the development of German power prices.

In line with coal, EUA prices bounced back strongly after comments by the German chancellor on the need for backloading, with an 11% week-on-weak increase. Statements from Poland claiming the country would push for all nations to commit to increased cuts in greenhouse gas emissions also helped to lift the market sentiment. Concerns over upcoming supply from the NER-300 were limiting the upside towards the end of last week.

Outlook for the week expects prices to trade in a sideways range amid a “neutral technical picture”. The prospect of upcoming supply from the NER-300 and possible increased selling pressure after compliance operators receive their free allocation for this year could weigh on prices and the €5/t support is likely to be tested again. Price movements are expected to be limited in either direction.

Adapted from press release by Katie Woodward

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