In Commodity News 12/12/2016
Interest in exporting thermal coal through the US Gulf Coast seemed to have all dried up earlier this week, as increasing freight rates and falling prices for thermal coal delivered in Northern Europe spun the wrong direction.
“My phone quit ringing,” said a US-based broker.
Wednesday, S&P Global Platts assessed CIF ARA thermal coal (basis 6,000 kcal/kg NAR, or roughly 11,300 Btu/lb GAR) at $80.25/mt, the lowest price since mid-October.
Platts’ FOB US Gulf Coast netback also hit bottom the same day, dropping to $50.10/st on increasing freight rates, which had climbed to $18.75/mt Wednesday after sliding as low as $9/mt in October.
Those rising freight rates already made the market tight, the broker said.
Another broker said “the way the [CIF ARA] has come off, I think we’re looking at the back end of people looking to export stuff. It’s only people who have stuff in the works instead of new entrants.”
That may have changed Friday, as Platts assessed CIF ARA at $91.20/mt, the highest price since December 5, 2012, on increased buyer interest from possible tight supply in the new year.
While freight remains high, the FOB US Gulf Coast netback also rose Friday to $60.45/st, meaning a trader could theoretically profit from an export shipment if they can load coal into a vessel at the Gulf Coast for less than that amount.
The FOB US Gulf Coast netback, which launched October 3, hit a high of $67.27/st November 7.
For a moment earlier this fall, exports did pick up, according to anecdotal accounts, and some Illinois Basin producers, such as Alliance Energy, locked in deals. The company reported in its October 28 earnings call that it had booked a deal to export 3 million st in the fourth quarter through Q1 of 2017.
The latest US Census data shows bituminous coal exports through New Orleans totaled 414,331 mt in October, down from 474,893 mt in September but up from 320,625 mt in August and 182,826 mt in July.
“There’s still some coal moving,” said a shipping source near New Orleans. “There’s been a couple of new vessels confirmed. It hasn’t been quite as active as a month or two ago, but people are hoping the [CIF ARA] would jump back up.”
While it’s unknown how long the spot price for thermal coal delivered into Northern Europe will stay strong, the backwardated forward curve doesn’t give confidence.
Platts Friday assessed the Q1 2017 swap price at $69.85/mt, and the Cal 2017 swap at $63.25/mt, as questions about demand prove stronger than concerns about supply.
Source: Platts
