European Coal Market Pressured by Supply Glut

Peabody Energy says may seek bankruptcy protection.

European thermal coal held near multi-year lows on Wednesday, as the market remained in oversupply, limiting any potential gains.

European cargoes for nearby delivery into Amsterdam, Rotterdam or Antwerp (ARA) last closed at $45.75 a tonne, having fallen around 5 percent since the start of the year.

European API2 coal futures traded up 70 cents to $40.40 a tonne, having dipped to $36.30 in February, the lowest level since May 2003.

Traders and analysts said that they did not expect thermal coal's fortunes to turnaround anytime soon, particularly given the sharp decline in imports by top consumer China over the past 18 months.

"We seriously doubt that China can come to the rescue of the global coal market, a market distressed by structural oversupply and besieged by low demand growth," Societe Generale (SGE.SG) said in a note.

This, combined with the mining industry being slow to cut supply in response to lower prices, was expected to prolong the bear market.

"In the longer term, it is the supply side that has the potential (and the incentive) to improve the situation - but the longer the supply side fails to curb the oversupply, the longer prices will take to recover, and the supply cuts are by no means a foregone conclusion," Societe Generale said.

The U.S. coal industry continued to suffer from falling demand and cheaper gas with Peabody Energy Corp, its largest coal producer, saying it may have to seek bankruptcy protection.

Reporting by Sarah McFarlane