Coal for 2014 Plunges to Record as Credit Suisse Cuts Forecast

European coal for 2014 dropped to record as Credit Suisse AG analysts cut their price forecasts for the fuel and the region’s electricity costs.

European power will average 37.5 euros per megawatt-hour in 2016, down from 46.60 euros forecast in December, Zoltan Fekete and Vincent Gilles said in a research note today. They cut their outlook amid expectations that stagnant power demand won’t be matched by reduced capacity, and on lowered price forecasts for carbon emission permits and coal.

“At that anticipated level, gas plants will continue to lose vast amounts of money while coal spreads will come down to break-even levels by the end of the decade,” the analysts said.

The price of coal for 2014 delivery to Amsterdam-Rotterdam-Antwerp declined as much as 1 percent to $88 a metric ton, the lowest level since the contract started trading in January 2010, broker data compiled by Bloomberg showed.

European coal will average $85 a ton this year compared with a previous forecast of $108.20, the bank said. In 2014, the cost will average $92 a ton from $114.10 predicted in December.

The German clean-dark spread, a measure of the profit from burning coal to generate electricity, fell as much as 4 percent to 7.40 euros a megawatt-hour, the biggest decline in three weeks, broker data on Bloomberg showed.

EU carbon will average 3 euros a ton this year compared with a previous forecast of 7.4 euros, the analysts said. Contracts for delivery in December were trading at 4.02 euros a ton at 3:30 p.m. in London.

To contact the reporter on this story: Marek Strzelecki in Warsaw at mstrzelecki1@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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