Coal May Have Bottomed Out as Supply Cuts Loom, Barclays Says

Coal prices may have touched bottom and be poised to rise as disruptions from Colombia to Indonesia threaten supplies, Barclays Plc’s investment-banking unit said in a report.

Benchmark contracts are on the verge of breaking out of a range as workers at Cerrejon, a Colombian coal mine owned by BHP Billiton Plc (BHP), Xstrata Plc (XTA) and Anglo America Plc (AAL), prepare to strike as early as next week, Trevor Sikorski, an analyst at Barclays in London, wrote today. Bad weather in the Pacific Basin may affect shipments from Australia and Indonesia and rail work stoppages may arise in New South Wales, Australia, he said.

“Further price downside could be limited, given the low prevailing levels and the potentially bullish drivers” outlined, Sikorski said.

Coal on the New York Mercantile Exchange has declined 3.8 this year to $55.83 a ton as of yesterday.

Thermal coal for 2014 delivery to Amsterdam, Rotterdam or Antwerp, the European benchmark, rose 1 percent to $100 a metric ton today, according to broker data compiled by Bloomberg, down $2.10 this year.

Spot prices for coal shipped from Richards Bay, South Africa, fell $1.84, or 2.1 percent, to $85.50 a metric ton as of Jan. 18, a 10-week low, data provided by IHS McCloskey show.

The threatened strike at Cerrejon, Colombia’s largest mine, “could have lasting impact in Q1 exports out of the country,” Sikorski wrote.

A strike may remove 600,000 metric tons a week from the market, or 40 percent of Colombia’s exports, and that would lift European coal prices, Sikorski said.

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.