Physical coal prices in Europe remained subdued on Thursday as the Atlantic basin returned to surplus following the end of a strike in Colombia earlier in August.
Coal prices have been declining for much of the first half of the year as weak demand clashed with rising exports from the United States, where coal-fired electricity generation has become unprofitable as a result of the shale gas boom in North America.
Colombian production dipped in late July and early August as a rail strike prevented coal from inland mines from being transported to export terminals along the coast.
As a result of the strike, the Atlantic basin saw a supply squeeze but following the end of the dispute two weeks ago, the Atlantic is expected to return into surplus by the end of this week, analysts say.
For the remainder of the year and 2013, BarCap said that it expected a slight surplus.
The bank said in a research note on Thursday that 2012's import demands of 837 million tonnes would be met by available exports of 843 million tonnes, while 2013 would see import needs of 849 million tonnes met by 850 million tonnes ready for export.
“Coal pricing remains subdued, with weaker demand growth from Chinese steel and power producers, coupled with healthy supply increments from traditional exporters and the US, leaving the seaborne market well supplied.”
The healthy coal exports mean that BarCap expects prices to drop, with API2 (European) prices to average $94 per tonne in 2012, and $92 a tonne in 2013.
South African API4 prices were expected to fall from an average of $95 to $94 a tonne between 2012 and 2013, while Australian Newcastle coal prices would see a an annual average decline from $99 a tonne to $97 per tonne.
Despite healthy coal demand in Europe and Asia, BarCap said that “the story of the market has been supply, with most exporters able to increase production and US volumes becoming more available.”
A South African Richards Bay cargo for delivery in October traded at $87.25 a tonne on the GLOBALcoal trading platform and November was offered at $88.75.
No European DES ARA contracts traded, but September was offered at $90.25 while November was offered at $92.50 per tonne. - Reuters