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THERMAL COAL-Australian coal prices under pressure from sagging Chinese demand

Published 09/03/2016, 07:33 pm
Updated 09/03/2016, 07:40 pm
© Reuters.  THERMAL COAL-Australian coal prices under pressure from sagging Chinese demand
JPM
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* China's February imports down 11.1 pct

* European coal prices pushed up by cold, windless weather

* But end of winter to put pressure on coal there too

* U.S. bank JPMorgan cuts financing into coal sector

By Manesha Pereira

SINGAPORE, March 9 (Reuters) - Australian thermal coal prices have fallen since the beginning of the month, pulled down by weak demand from China, and analysts said there was little hope for a rise in prices if China's imports do not pick up.

China, the world's largest coal buyer and consumer, imported 13.54 million tonnes of coal in February, down 11.1 percent from January, figures from the General Administration of Customs of China showed this week.

The ongoing demand and import slowdown in China is a result of its stalling economy, which is growing at its lowest pace in a generation, as well as structural shifts away from an industrialised to a more service-based economy alongside the government's efforts to rein in rampant pollution.

"It will be nearly impossible for coal pricing to recover appreciably in 2016 or 2017 if China's imports continue to fall," New York-based consultancy PIRA said.

Benchmark physical coal cargoes for export from Australia's Newcastle terminal GCLNWCPFBMc1 last settled at $53 per tonne, down from a 2016 peak of $55.05 reached on March 1.

In Europe, cold weather and low renewable energy caused a gain in European thermal coal prices since the beginning of March, although a milder outlook for the rest of the month has led to a dip in prices this week.

Coal cargoes for delivery into Amsterdam, Rotterdam or Antwerp (ARA) last closed at $46.50 per tonne GCLARAPDSMc1 , up from a multi-year low of $41.95 a tonne reached on Feb. 22, although traders said prices would come under pressure later this month as the weather gets milder.

Meteorologists said continental European temperatures, currently 1 to 2 degrees Celsius below the seasonal norm of slightly over 5 degrees, were expected to steadily rise towards more usual levels of 6.5 degrees towards the end of the month.

While the looming end of winter typically cuts coal consumption this time of the year, traders said that unusually low wind power output would somewhat support coal demand in coming weeks as coal-fired power stations have to back up for the underperforming wind capacity.

In coal financing, U.S. banking giant JPMorgan this week became the latest of many financers to cut investment into the coal industry.

"JPMorgan Chase & Co (NYSE:JPM) has ... cut financing for the global coal industry. The policy promises a transition away from financing for coal mining companies, and an all-out end for financing of new coal mines," the bank said, adding that its new policy was a result of "public pressure from climate activists." (Editing by Henning Gloystein and Gopakumar Warrier)

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