European coal prices drop as demand ebbs

European physical coal prices spent most of the first two weeks of July in decline as demand ebbed, and imports by major Asian buyers also slowed in line with economic growth in the region. In Europe, August physical cargoes into Amsterdam, Rotterdam or Antwerp (ARA) were last settled at $58.10 per tonne, down almost $2 since the beginning of July.
"Both demand and the macroeconomic environment continue to disappoint," London-based brokerage Marex Spectron said in a note to clients, although it added that a gradual tightening of supplies would support prices around current levels. In the Asia/Pacific region, Australian August cargoes from the Newcastle terminal were priced at $60.70 a tonne, almost unchanged since the beginning of the month, supported by a short-term pick-up in Chinese imports due to high summer demand.
But the overall outlook for the region remained for low prices. Although China's June coal imports rose 16.5 percent on the month in June, supported by peak summer demand, they were still down 34 percent on the year as its economy grows at its lowest rate since the 2008/09 global financial crisis and the government introduces new environmental laws to combat rampant pollution. "Eroded purchasing power, new environmental policies and nearly closed import arb all played their role in the decline of (China's) coal imports," Marex Spectron said.
In South Korea, coal imports fell 2.5 percent in June from a year earlier, customs data showed on Wednesday. Morgan Stanley said that judging by developments in Indonesia, the world's biggest thermal coal exporter, prices could drop further still. "India and China are reducing their imports, turning increasingly to their abundant domestic coal resources," the bank said.
With China's and India's coal imports ebbing, Morgan Stanley said that Indonesian miners might turn to other buyers. "If Indonesia's miners can somehow engage their established counterparties in Japan, Korea and Taiwan, then Newcastle and (South African) Richards Bay prices face downside risk," the bank said.