Global Utility Coal Prices Tumble on Slack Demand, Barclays Says

Thermal coal prices from Appalachia to South Africa have tumbled because of slack demand for the power plant fuel, Barclays Plc (BARC)’s investment-banking unit said in a report today.

Prices in Europe, South Africa’s Richards Bay and the U.S. have slumped even as frigid weather across the globe has raised natural gas prices, Trevor Sikorski, an analyst at Barclays in London, wrote in the report.

“With prices starting to head to levels at which U.S. and Russian coal struggles to sell into Europe, or anywhere else, the outlook for producers’ margins remains poor for this year,” Sikorski said.

China, the world’s biggest producer and consumer of the fuel, may have more competitive prices from domestic mines, drying up demand in the seaborne market, and smaller currently idled operations may resume output after the National People’s Congress is concluded in March, it said.

“If this does happen, then coal prices are likely to remain low, both in China and globally,” Sikorski wrote.

Coal on the New York Mercantile Exchange is down 1.7 percent to start the year at $57.02 a ton as of yesterday. Prices fell eight consecutive days before yesterday, the longest streak of losses since Aug. 25, 2010.

Thermal coal for 2014 delivery to Amsterdam, Rotterdam or Antwerp, the European benchmark, fell 1.1 percent to $99 a metric ton as of 3:34 p.m. London time, according to broker data compiled by Bloomberg, the lowest level since the start of trading in January 2010.

Spot prices for coal shipped from Richards Bay fell $1.60, or 1.8 percent, to $87.34 a metric ton as of Jan. 11, a four- week low, data on Bloomberg provided by IHS McCloskey show.

Spot coal in Russia traded at $82.50 a metric ton in the week ended Jan. 11, the cheapest since Nov. 2.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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