European winter coal prices jump by almost 6%
But the prices are still down 15% & 24%, respectively, from their 2015 peaks in February.
SINGAPORE - European thermal coal prices have jumped almost 6 percent in November as the northern hemisphere enters the peak demand season, although analysts cautioned that an unusually mild winter this year could keep a lid on gains.
Prompt European physical coal cargoes for delivery into Amsterdam, Rotterdam or Antwerp (ARA) have risen to $55.40 a tonne this month, while cargoes for export from South Africa's Richard's Bay port are up over 10 percent at $54.45 a tonne.
But the prices are still down 15 percent and 24 percent, respectively, from their 2015 peaks in February. Australian cargoes from its Newcastle terminal have also shed a third since then to hit record lows of $50.50 per tonne.
"We expect some relief for thermal coal prices as northern hemisphere weather conditions cool," ANZ bank said. It expects prices to rise 8 percent on average over the next three months.
This would, however, be less than gains of 15-30 percent gains seen during colder winters over the past years.
"Our weather forecast for the beginning of November indicates that the whole of western Europe will be significantly warmer than average," said commodity brokerage Marex Spectron.
A strong El Nino weather effect that is likely to result in warmer-than-usual winters in coal-consuming northern Asia is also expected dent prices of the fuel.
Higher production will be the other big drag on coal, analysts said.
"Key coal exporters in Australia continue to ramp up supply... (and) the absence of stronger demand is likely to cap both the gains and length of any price bounce," ANZ said.
Macquarie bank warned that the low prices meant many coal producers, especially in China, faced severe debt problems.
"We are talking about an industry which expanded rapidly for demand which not only didn't come quickly, but increasingly looks like it might not come at all," the bank said.
"The (Chinese) coal industry is already trying to encourage employees to leave their jobs," it added.
But in the long-term outlook for coal, there is a silver lining - Asia. Almost all of its large emerging economies, including China, India, Indonesia and the Philippines, are expected to mostly rely on coal to grow their power supplies.
Japan and South Korea are also showing little signs of denting their use of thermal coal. Of the more than 500 coal-fired power stations being built around the world, 80 percent are in the Asia/Pacific region.