Physical prompt coal prices saw little movement in Europe on Friday, ahead of a long weekend in Britain, and the market remained subdued as a result of rising Colombian output and weak demand from the region's sluggish economy.
Traders said production in Colombia, where a rail strike led to a supply squeeze in earlier in August, was continuing to rise and was expected to reach normal output again by the end of next week, resulting the seaborne Atlantic coal market returning into surplus.
Analysts said that the supply surplus was expected to persist in coming years.
“We see very few adjustments supporting a more positive price outlook over the 2013-2017 period, over which we model an increasing surplus,” Deutsche Bank said in a research note on Friday.
The downward price pressure this surplus has created is being emphasised by weakening Chinese demand.
Australian thermal coal prices fell toward $91 a tonne this week on sluggish sales as buyers from China, the world's top consumer, remained on the sidelines while slowly digesting stocks at home, trade sources said.
Despite the downward momentum, traders said European coal prices would bottom out soon as further price drops would knock out some production.
“Once we see DES ARA prompt prices approach $90 a tonne, some production will halt as they can't send their coal to Europe at a profit under that level, and once these supplies go off, prices will lift,” one coal importer said.
No trades were heard on Friday but South African Richards Bay cargoes for delivery in September were bid at $83.75 per tonne on the GLOBALcoal trading platform. November shipments were bid at $87 a tonne. - Reuters