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THERMAL COAL-Physical coal prices drop as northern hemisphere enters spring

Published 06/04/2016, 03:54 pm
Updated 06/04/2016, 04:00 pm
© Reuters.  THERMAL COAL-Physical coal prices drop as northern hemisphere enters spring
GLEN
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* South African coal at an over $10/mt premium to Europe

* South African mines hit by strikes

* Coal demand softening as winter ends in northern hemisphere

By Henning Gloystein

SINGAPORE, April 6 (Reuters) - Physical coal prices have fallen since the beginning of April as key consumer regions in the northern hemisphere move out of the peak-demand winter heating season and into spring.

Benchmarks serving the Asia/Pacific region, where demand in some emerging markets remains strong, continue to outperform those into Europe, where strong renewable output has been eating into fossil-fuel consumption already falling due to improved energy efficiency and low population and economic growth.

Prices for coal cargoes out of South Africa's Richards Bay GCLRCBPFBMc1 and Australia's Newcastle terminals GCLNWCPFBMc1 , which are the main benchmarks for the Asia-Pacific region, have both fallen around 5 percent, to $54.10 and $51 per tonne respectively, since the beginning of April as the key winter heating season ends in China, Japan and South Korea.

Similarly, coal imports into Europe's main ports of Amsterdam, Rotterdam or Antwerp (ARA) GCLARAPDSMc1 have become almost 7 percent cheaper since late March, when the first mild spring-time weather started to emerge, last settling at $43.30 a tonne.

All three benchmarks started the year around $50 per tonne.

The steep discount of up to $10.80 a tonne for ARA coal - which is bigger still when considering that cargoes into Europe include the price of freight while those from South Africa and Australia don't - is largely a result of strong renewable output, traders said. Prices serving Asia were in part supported by strong demand from emerging markets.

"Ongoing strong renewable output from wind and solar, although mostly not above the seasonal norm recently, has been added to by rising hydro power availability in northern Europe and the Alps, which can be fed into the continental interlinked power grid, reducing the need for fossil-fuelled power generation," said one European utility trader.

In Asia, by contrast, there were signs of strengthening demand in some emerging markets. Vietnam imported about 2.8 million tonnes of coal between Jan. 1 and March 15, a surge of 300 percent from a year earlier, while it bought nearly 7 million tonnes from abroad in the whole of 2015, Vietnam Customs data showed on Wednesday. South Africa, output could be hit by a wave of mining strikes that have turned violent in parts and resulted in the arrest of over 50 miners at a coal mine owned by Glencore GLEN.L . GRAPHIC on Physical coal prices

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