Reuters reported that physical thermal coal prices in Europe were steady to slightly higher on Monday, along with crude oil prices, while a report by Bank of America Merrill Lynch underlined coal's dominant position over natural gas as a feedstock for power generation.

A South African Richards Bay cargo for delivery in October traded at USD 87.50 a tonne on the GLOBALcoal trading platform, while November was traded at USD 89.25.

No European DES ARA contracts traded, but October was bid at USD 91.25 while November was bid at USD 92.75 per tonne, representing a slightly higher trading range compared with late last week.

One analyst at a small trading house said that “Coal is just hovering around the psychologically important USD 100 a tonne level and will continue to do that for the rest of the year. Firm trading sentiment on crude oil markets was helping to support coal prices. Brent futures were steady to slightly higher as investors focused on the possibility of more stimulus measures to revive economic growth.”

Analysts at Bank of America Merrill Lynch said the amount of gas used for power generation hit a five year low in August as generators switched to coal. He said “Power generators are shunning natural gas. Therefore, most European generators have replaced more expensive natural gas with cheaper coal as the base load feedstock of choice in 2012, continuing a trend of gas to coal switching that started to be evident last year.”

The influx of American coal shipments to Europe has led to a supply glut that has helped drive down prices, making coal cheaper and more competitive than any other feedstock.

Source - Reuters

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