South African Export Coal Retreats on Weaker European Demand

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Tuesday, 28 April 2009

Prices for coal shipped from South Africa’s Richards Bay, site of the world’s largest export terminal for the fuel, fell for a second consecutive week on weaker demand and sufficient stockpiles in Europe. Export prices at the port, Europe’s biggest single source for coal burned for power, dropped $1.30, or 2.1 percent, to an average of $61.50 a metric ton in the week ended April 24, according to McCloskey Group Ltd. Prices have fallen 45 percent over the past 12 months as demand for power slumped after manufacturers cut output to grapple with the global recession. The world economy will shrink 1.3 percent this year, according to the International Monetary Fund. “There’s lots of stocks in Europe and not many buyers around,” John Howland, an analyst at Petersfield, England-based McCloskey Group Ltd., said today by telephone. The “coal of choice” at the moment in Europe is Colombian, he said. That may ease demand for South African imports. Colombian coal supplies may increase after a strike ended this month at Fenoco, a rail company 40 percent-owned by Xstrata Plc. That, plus the end of weather disruption in Australia, will help push prices down to an average $55 a ton in the second and third quarters, Jim Lennon, a Macquarie Group Ltd. analyst in London, wrote in a report dated today. “The market is generally well-supplied,” he said. The port of Rotterdam, Europe’s biggest, imported 7.7 million tons of coal in the first quarter of this year, up 24 percent from the same period of 2008, the port said in an e-mail on April 9. That may indicate a buildup of stocks. Power station coal prices at Australia’s Newcastle port, a benchmark for Asia, were almost unchanged in the week to April 24, falling one cent to $63.11 a metric ton, according to the globalCOAL NEWC Index. Benchmark European coal derivatives fell. Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year retreated $2.50, or 3 percent, to $81 a ton as of 2:49 p.m. in London. The data from ICAP Plc reflect actual trades. Source: Bloomberg