Singapore - Physical coal prices in Australia and Europe have dipped over the past week but remain much higher than at the beginning of the year, although analysts said that oversupply would drag prices down further.
Coal for delivery next month from Australia's Newcastle terminal fell more than 2.5 percent over the past week to $73.30 a ton, although that is 20 percent higher than in early January.
Cargoes for delivery into Europe's main ports at Amsterdam, Rotterdam and Antwerp were down 4.5 percent on the week at $62.80 a ton, but virtually flat against January prices.
This put Australia at a premium of more than $10 over Europe, and if Australian freight prices are included, which they are in Europe, this difference would be higher still.
Analysts said the Australia/Europe spread would probably narrow as Atlantic basin demand was relatively strong due to Europe's winter heating season, while Australia's recent rally was overblown.
Brokerage Marex Spectron said the price outlook for Australian coal had turned negative again after spending a brief period in positive territory earlier this year.
“The recent NWC FOB (Newcastle Free On Board) price advance was hardly justified,” the brokerage said, adding it expected Australian prices to trend downward in the next 30 days.
In the Atlantic basin, where the price rises since January have not been as steep as in the Pacific, analysts said the price outlook was slightly firmer as most of Europe was experiencing winter weather, pushing up energy demand.
Overall, however, global coal markets remain oversupplied.
In the Atlantic, Colombia said on Wednesday it expected to produce 97.8 million tons of coal this year, up 10 percent from 88.6 million tons in 2014.
In the Pacific, production in leading exporters Indonesia and Australia also remains high, while demand from top importer China is slowing in line with both its economic growth plus a political move to support domestic coal miners.
Also weighing on coal markets has been the oil price rout, which has seen international benchmark Brent crude futures fall by more than half to under $60 per barrel, significantly reducing fuel costs for mining operations.
Finally, the strengthening of the US dollar against mining export currencies such as Australia's dollar or Indonesia's rupiah has reduced production costs, allowing miners to offer their coal at a lower price in defence of market share in the dollar-traded seaborne market.
Reuters