European physical coal prices fell on Friday ending a week dominated by sharp price increases as traders closed long positions taken out this month. Cargoes for delivery in August to Amsterdam, Rotterdam and Antwerp (ARA) traded at $73.75 per tonne on the globalCOAL trading platform by 1345 GMT, down $2.70 from Thursday's settlement. September prices were 25 euro cents lower at $77.50 a tonne.
"We've seen prices rise by almost 10 percent in the past weeks, so a lot of traders will have shut their positions today to cash in the profit, and that sent prices down," one coal trader said. The price drops ended weeks of rising prices in Europe. Physical prices are up by more than 8 percent this month following a tightening of European sanctions against Russia over the Ukraine crisis.
"Although the sanctions aren't targeting energy supplies to Europe, markets got very nervous this week so price went up," one energy trader said. "There is a worry that even if Europe doesn't target energy supplies, Russia may retaliate with coal and gas export reductions to Europe," he added. Traders said other factors had also contributed to higher European prices.
"Colombian supplies are pretty much sold out for Europe at the moment, and there may even be some export restrictions there soon if those mechanic strikes continue," one coal shipper said. "The Colombians are also selling more coal into the US at the moment as American utilities prefer to import cheap Colombian coal than buy it from their own miners. So that's further reducing supplies to Europe, although it has to be said that the overall coal market remains oversupplied."
Analysts estimate that the global seaborne thermal coal market will be 7-10 million tonnes oversupplied this year and expect the glut to continue into 2015. The oversupply is particularly apparent in the Pacific market, where Australian prices continued to fall, going from price parity in June to a discount to Europe of almost $10 per tonne. "Australian production is healthy, while Chinese coal import demand is slowing, so that's already bearish for Asian coal prices," one coal broker said. "On top of that you have an overhang in India, where port stocks are full as the railway system isn't capable of transporting coal from harbours to power stations, where it is needed, preventing the ports from taking in new shipments," he added.