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  • January 20th, 2011

Euro Coal-Prices stabilise, fundamentals seen strong

Prices of prompt coal cargoes stabilised on Wednesday but in the very short-term more profit-taking and liquidation of long positions is expected to trim prices before the fundamentally driven uptrend continues.

“There’s still a lot of length left in the market — the volume sold isn’t close to the positions we think are being held,” one European trader said.

The partial reopening of rail lines and some flow of coal to ports in parts of Australia hit by floods has caused the market — particularly swaps traders — to take a more relaxed view of supply disruptions, and prompted selling.

The Australian coal sector is seen as being on the mend but a full recovery to pre-flood export levels is likely to take months rather than weeks and this will cut into global thermal coal supply as well as coking coal.

The overall global picture is one of continued tightness and the threat of still more weather-caused disruptions, consumers and producers said.

“There’s more rain on the way in Australia, a lot of people are having problems with wet Colombian coal and not getting it on time, and Indonesia’s set for more rain so it’s still looking tight,” one trader said.

“While it is not possible to accurately predict longer-term weather developments, the continued intense La Nina weather system suggests that further disruptions remain highly possible,” Credit Suisse said in its weekly Commodities Note.

What China will do next — continue importing strongly or re-sell unwanted spot cargoes — is the big unknown in the thermal coal market, more so than Australia’s weather.

China’s imports soared 25 percent to a record 17.34 million tonnes in December, due to severe winter weather and import prices falling below domestic coal values.
“China has been re-selling, up to a point, but our view is that they’ll remain a strong importer this year and they have just capped their exports at a low level,” a European trader active in the Chinese market said.

Trades

A March loading South African cargo traded at $121.00 a tonne, unchanged from the mid-point of Tuesday’s bid/offer spread.

Two April loading South African cargoes traded at $120.00 a tonne, little changed.

March delivery DES ARA cargo traded at $123.75, down $1.00.

PRICES

A March DES ARA cargo was bid at $122.00, down 50 cents.

An April DES cargo was bid at $120.00 and a February cargo was bid at $123.00, also little changed.

A March loading South African cargo was bid at $121.00 and offered at $122.50, up $1.00 on the bid.

An April loading cargo was bid at $120.10 and offered at $122.50.

Source: Reuters

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