Coal Falls on Weak Chinese Demand, 2-Year Oil Low

Thermal coal prices dropped on Thursday as weak demand in top importer China pulled down prices in Asia while European contracts fell as Brent crude oil futures hit two-year lows.

Australian coal cargoes for delivery from its Newcastle terminal in October were trading at $66 a tonne by 1320 GMT on Thursday, down 25 cents from their previous settlement, while October cargoes were 35 cents lower at $65.05 a tonne, meaning that both contracts remained near 5-year lows.

"Underlying Pacific-basin fundamentals remain weak, with Chinese coal consumption in particular continuing to disappoint (and) we think that actual Chinese thermal coal consumption showed negative YoY (year-on-year) growth in July and August," Australian bank Macquarie said in a research note on Thursday.

"This is the main reason for the physical price weakness," the bank said, adding that on the basis of current Chinese domestic prices and seaborne freight a current price in the mid-$60s per tonne was fair value.


European Premium
The falls mean Australian coal prices have lost a quarter of their value since the beginning of the year and are now about $10 per tonne cheaper than coal imported into Europe, where prices are higher due to supply risks from the crisis in Ukraine. Both Russia and Ukraine are coal exporters.

Despite Europe's coal price premium over Australia, cargoes into Amsterdam, Rotterdam and Antwerp (ARA) also fell on Thursday, with November deliveries down 40 cents to $74.60 per tonne. Traders said the price fall was largely a result of cheaper oil prices.

Brent crude dropped to a two-year low below $97 a barrel on Thursday, falling for a sixth straight session as worries over mounting supply and weak demand outweighed concerns that conflicts in the Middle East could curb oil production.

(Reporting by Henning Gloystein; editing by David Clarke)