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Physical coal indices - supply tightness boosts February numbers

28 Feb 2013 18:26:33 | csd

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Supply tightness in the Atlantic and Pacific basins because of problems in Australia and Colombia lifted physical coal prices during February.

Colombia, Europe's biggest supplier of coal recently, has seen its ability to export coal throttled. One analyst from a European bank estimated up to 95% of the country's export ability has been curtailed because of four issues affecting production.

The biggest factor has been workers for Colombia's largest producer, Cerrejon, going on strike early in February. But US-headquartered producer Drummond also had its licence to load coal in the South American country suspended, while Colombian rail freight hauler Fenoco has halted some overnight operations. Finally, the owner of the La Francia mine claim it is owed money by a unit of Goldman Sachs, which is affecting its production.

Physical prices in DES ARA picked up when the Cerrejon workers walked off the job on 7 February, but deal activity dried up in the second half of the month. The last transaction reported to ICIS was on 12 February. "Utilities' stockpiles [in Europe] are still quite healthy, so they are not worried yet," said one broking source, who added buyers are keen to get some definite news before acting.

The index-qualifying deals that went through beefed the ICIS DES ARA February '13 coal index to $88.038/tonne, from $86.27/tonne a month earlier.

Supply-tightness in Colombia had a knock-on effect on the South African FOB RB physical market. The ICIS FOB RB February '13 index firmed month on month, settling at $85.597/tonne, up from $82.642.

Sources said the market has been dominated by two main players from Europe. Indian and Chinese buyers scratched the surface, but generally considered prices too high to take the plunge and buy some cargoes.

The Australian FOB Newcastle market had something of a reawakening in terms of deals compared with recent months, with 19-index qualifying deals reported to ICIS in February. Only six made the grade last month.

Railway workers in New South Wales for freight company Pacific National Coal started a two-day strike in early February. Pacific National estimated the strike prevented 600,000 tonnes of coal from reaching the port.

"It needs to be understood that the 600,000 tonnes of delivered coal lost as a result of this action cannot be recovered in the future. New South Wales coal chains operate at maximum capacity every day of the week, meaning these losses are real," said David Irwin, a director of Pacific National Coal, at the time.

Within the same time frame, flooding from the aftermath of tropical storm Oswald also pushed global miners Xstrata and BHP Billiton to declare force majeure on some coal exports from the port of Gladstone, in Queensland, Australia.

The ICIS FOB Newcastle February '13 index settled at $94.702/tonne, 2.1% higher the January index. Fionn O'Raghallaigh

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