Euro Coal Prices Drop on Oversupply
European physical coal prices dropped on Wednesday as weak spring demand and lower production revenues in Britain pulled down orders bids.
Cargoes for delivery in June to Amsterdam, Rotterdam and Antwerp (ARA) were trading at $73 a tonne, down 25 cents and around 15 percent lower than at the beginning of the year.
Traders said the price drops were a result of healthy supplies combining with low spring time demand, as well as due to lower profit margins in Britain.
"Globally, coal fundamentals remain weak, with high supply availability and sluggish demand growth keeping downward pressure on coal pricing," U.S. energy researchers PIRA Energy said.
"The recent decline in short-term (UK) gas prices, combined with the rise in the UK carbon price floor, has been impacting the UK merit order for the first time in a long time (and) a number of marginal UK coal units now face a new set of threats, with renewable generation being one of them," PIRA Energy added.
Britain has a 9.55 pounds ($16.08) per tonne tax on carbon emissions in place since April 1, which will rise to 18.08 per tonne from April 2015, aiming to ensure power producers pay at least 30 pounds per tonne for emitting carbon dioxide (CO2) by 2020 to help spur investment in low carbon technology and encourage utilities to switch from burning coal to gas.
Reuters data shows power generation revenue margins for baseload (24 hours) front-quarter British coal-generated electricity, excluding the carbon tax, have dropped by 40 percent since the beginning of the year to around 19 pounds ($31.99) per megawatt-hour (MWh).
($1 = 0.5939 British Pounds)
(Reporting by Henning Gloystein, editing by David Evans)
