Weak demand, gas futures weigh on eastern US OTC coal market
Houston (Platts)--18Jul2014/555 am EDT/955 GMT
Eastern US over-the-counter thermal coal prices fell for a fourth
straight session Thursday on the back of a weaker natural gas futures
market and an absence of demand, sources said.
One broker said the weakness in the gas futures market "caused a
sell-off" in the coal market, adding that the market sidestepped any
bullish knock-on uncertainty from a Malaysian Airlines jet being shot
down in Ukraine.
The NYMEX August gas futures contract settled at $3.954/MMBtu, the
lowest front-month close since November 29, 2013.
But sources said a price floor was starting to be form, with the broker
saying he saw a "good floor" of around $55/st for the front-month CAPP
CSX contract.
He added that due to that weakness, the financial market might start
disconnect from the physical market, with the physical market starting
to "not be representative of the general market." He said this did not
happen often.
A second broker agreed that a floor was "starting to get established" as
there were no bullish factors to prop prices higher.
The broker said that a combination of coal rail transportation issues,
lack of demand due to seasonal temperatures and illiquidity were all
contributing to the bearish sentiment.
In the financial market Thursday, a Q4 2014 CSX Central Appalachian
contract (12,500 Btu/lb) traded at $58/st for 5,000 st/month.
Also, an August deal went through at $58.25/st for 10,000 st and
September traded twice at $57.75/st for a total of 15,000 st. Physical
August CAPP CSX traded at $57.75/st for one train (11,000 st).
In the physically-cleared CAPP barge market, an August trade went
through at $60.20/st for five barges, October traded at $59.90/st for 15
barges and November traded at $59.90/st for eight barges.
After the Platts 2:30 pm EDT (1830 GMT) Market on Close assessment
process ended, the CSX CAPP Q4 2014 contract went through at $57.75/st
for 10,000 st/month.
The deal was not taken into account in Platts assessment.
Platts assessed the August physical CAPP CSX contract at $57.75/st, down
45 cents day day and at its lowest since March 25.
Platts assessed the front-month August CAPP barge contract at $60.20/st,
a decrease of 15 cents compared with Wednesday and at its lowest since
July 3.
PRB 8,800 AUGUST RISES 10 CENTS TO $11.65/ST
In the Western US coal market, three physical August Powder River Basin
8,800 Btu/lb deals went through -- two at $11.60/st for a combined total
of three trains of 15,000 st each, and one at $11.65/st for one train.
The first broker said PRB prices were beginning to be "unprofitable" for
producers as the front-month contract was approaching the "mid $11/st"
level.
He said this was a factor of miners having "too much coal left over that
they have to get rid of" coupled with a lack of demand to absorb it.
The trader agreed, adding that "until rail service improves, spot prices
will languish" and producers might need to purchase their own tonnages
back from the OTC market.
The trader said the PRB market was not affected by the plane crash in
the Ukraine as the market was "disconnected" from European fundamentals.
He said this was due to there being "less participants, traders and
speculators" active in the market and lower tonnage heading to Europe.
Platts assessed the front-month August contract for the physical PRB
8,800 Btu/lb contract at $11.65/st, up 10 cents day on day.
--Jaime Concha, jaime.concha@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com
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