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Global thermal coal futures trim gains and market refocuses on oversupply

Coal News - Published on Fri, 20 Feb 2015

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Reuters reported that thermal coal futures edged lower, trimming recent gains, as oversupply continued to plague the market and was expected to force prices to resume their downtrend.

European API2 2015 coal futures edged down 1.8% to USD 62.00 a tonne, after rebounding in recent weeks from a 9 year low of USD 55.60 hit on January 26th.

European prices were supported by limited Russian exports due to freezing temperatures reducing activity at Baltic ports.

Traders and analysts feared that the bounce could exacerbate the supply glut, delaying price signals for production cuts getting through to suppliers.

Mr Tom Pugh, an analyst at Capital Economics, said that "The recent price rally will delay further mine closures in Australia and Indonesia which will maintain high levels of supply."

Last month global miner Glencore, the world's largest exporter of thermal coal, said it was considering closing some of its South African coal mines due to deteriorating market conditions.

Analysts and traders however said they did not believe the move would be enough to combat global oversupply.

One trader said that “At the end of the day Glencore is cutting production but they are not cutting exports. They're reducing their production from the high cost mines at the end of the day they are just reducing where the high cash costs are but they will end up producing the same or more."

Indonesian coal miner Garda Tujuh Buana has suspended production as low prices and excess supply continue to press the industry and force smaller and low-rank coal producers out of the market.

The long-term demand outlook is also bearish, while top consumer China taking steps to protect its domestic industry and curb imports.

ANZ bank said that "Coal markets have been in the doldrums as supply has remained stubbornly high in the face of weakening demand."

Source – Reuters

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Posted By : admin on Fri, 20 Feb 2015
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