Euro Coal-June S.African trades at $99/T, down $1

European physical coal prices slipped by around 50 cents for the fifth day running on Thursday while prompt South African FOB dropped by $1.00 due to oversupply and tepid demand, despite strong coal consumption in the UK, Germany and Spain.

Even if coal remains significantly cheaper than gas as a fuel to generate power in Europe this year, it is unlikely that enough of the current high inventories will be consumed to trigger notable fresh buying, utilities said.

Utilities in the UK, Germany and Spain are burning a seasonally high proportion of coal because it is more profitable versus gas and because the UK and Germany are trying to destock, they said.

During April-September, European coal consumption is usually at its lowest because gas provides the most economic baseload power but high gas prices and tight supply are spurring utilities which can maximise their coal burn to do so.

"The UK is one of the few bright spots of demand, it's weak almost everywhere else," one utility source said.

As fast as coal is moved from stockpiles to plants, more is arriving, much of it Colombian and U.S. coal bought previously by traders.

The slow return of China to the spot market has not helped these trader longs - although China is set to import more this year, the fresh buying expected from February has yet to materialise in volume.

China is forecast to import 157.5 million tonnes of coal in 2012, a nearly 14 percent rise from last year's 138.6 million, according to Credit Suisse's Commodities Forecast Update earlier this month.

There have been strings of Colombian and other long-haul coal origins sold to China in the past few weeks but the Beijing Coaltrans conference this week ended with little spot business done amid generally bearish sentiment.

Producers and traders had flocked to Beijing in the hope of selling substantial volumes and were disappointed that imports are taking time to ramp up.

But some analysts and U.S. exporters expect to see strong growth in U.S. exports to China this year, because Chinese domestic prices are likely to remain above international levels, drawing in import coal.

U.S. coal exports to China could more than double this year to over 12 million tonnes, Ernie Thrasher, Chief Executive of U.S. exporter Xcoal Energy & Resources, said on Thursday .

TRADES

A June loading South African cargo traded via brokers at $99.00, down around $1.00 from Wednesday.

A June ARA cargo traded at $95.25, down 50 cents.

PRICES

A June South African cargo was bid at $99.25 and offered at $100.00, down 25 cents on the offer. 

Source: Reuters.com