Coal market continues downwards

The price falls on the European coal market continue. Wednesday afternoon, the price on a ton of coal dropped below 70 US dollars for the first time in more than a year.

The European coal market has been bearish for several months now, and the downturn has continued in early April. Wednesday, the market dropped below a technical milestone, as the benchmark coal contract, the API 2 Cal-20, fell below 70 USD per ton for the first time in more than a year. It closed the day with a price of 69.85 USD/t.

The market sees very weak demand right now. According to an unnamed analyst, interviewed by energy news site Montel, coal burn in the first quarter of 2019 fell 7 million tons in the seven largest European coal countries, including the United Kingdom, Spain and Germany, compared to the level during the same time in 2018.

Coal currently faces very sharp competition from gas. Falling gas prices over the last months have had the effect, that gas has overtaken large shares of the European energy mix previously covered by coal power. The profit margin for gas based power production is still higher than for coal, even though the coal prices have fallen as well.

If the development is to change, the coal market might need bullish support from the related market, for instance an upturn on the oil and/or gas markets. Alternately, an increased demand for coal in China could offer some momentum to the market. So far however, nothing indicates that the Chinese consumption is on the rise. The country’s import is still weak and the most recent data indicates, that coal also loses shares in the Chinese energy mix.