European coal dips US$2

Prompt physical coal prices fell by US$2/t on Wednesday, following those of oil, with limited activity and no new trades reported. DES ARA cargo for December delivery was bid at US$115 and offered at US$116.25.

Coal prices had looked rather fragile during the past two weeks as Chinese importers halted buying activity due to difficult conditions in the form of credit restrictions to open Letters of Credit for shipments already bought. The conditions have arisen as the Chinese government has recently tightened its monetary policy.

As Chinese buyers withdrew from the market, this triggered a slide in prices that was long overdue, according to traders and utilities.

“Looking forward, we believe that coal will be hit by a double-whammy in the next six months: a negative demand shock and steadily improving supplies,” Bank of America Merrill Lynch said in its Global Energy Weekly report.

“Arguably, the seaborne coal market has been oversupplied for months, with physical benchmarks trading at a discount to financially settled swaps. China has been the only real supporting factor, importing at new record highs,” the report said.

Meanwhile, December-loading Richards Bay cargo was offered at US$106.75, down US$1.25 from Tuesday.

US coal remained largely stable WoW with only Powder River Basin 8000Btu, 0.8 SO2 slipping from uS$14.30 to US$14.15/st on 4 November 2011.