Physical thermal coal prices in Europe remain unchanged for the second day on Tuesday to a slight increase recorded on Monday supported by crude oil prices. The oil prices remained steady and stood between $90 and $95 a ton, with market awaiting Columbian shipments to resume, that would trigger a bout of selling and may lead to fall in prices. According to reports, European coal for delivery next year, increased for the first time in eight days. Analysts at Bank of America Merrill Lynch highlighted the coal's dominant role over natural gas as the base load feedstock of power generation in 2012.
Analysts pointed that natural gas consumption for power generation hit a record low in August in five years with generators continuously been switching to coal. He further said that power generators in Europe have turned towards coal discontinuing the much expensive natural gas that is best evident from the last year reports. Rise in American shipments entering European market has resulted in supply growth which eventually made prices fall, making coal cheaper as compared to any other feedstock.
The workers at the La Jagua mine in Columbia, which is owned by a unit of Glencore's Prodeco, are continuing with their strike even after 28 days since its start, but Prodeco is all set to move coal from its Calenturitas mine as soon as the railway resumes its normal operations. Reports suggested that around 4 million tons so far have been estimated to be lost from the Columbia's exports in 2012. Also coal prices were seen declining in the first quarter of the year as result of rising exports from United States prior to less demand.
Unlike as in United States, coal has proved to be the first obvious choice of power generators and the cheapest feedstock found in Europe which is boosting the profit margins. Traders commented that despite of the large output cuts by Russian, Australian and Indonesian producers followed by weak demand; this will not affect the coal prices until late 2012 or early 2013. Too many variables are responsible for driving price-rise in the current market and it roughly split between those traders who believed that prices have fallen and those who predict for the worst to come in the future.