Thermal Coal Prices Edge up on Utility Orders

Thermal coal prices rose slightly on Thursday on the back of utility orders ahead of the peak demand winter season, but rises were capped by falling oil markets and because of a weaker economic outlook in China.

European API2 2015 coal futures prices were trading at $74.60 a tonne on Thursday afternoon, up almost half a dollar since their last close, and physical cargoes from South Africa's Richards Bay terminal for delivery in November were up 20 cents to $65.50 a tonne.

"There's been a fair amount of coal buying by utilities preparing for the peak demand winter season," one coal trader said.

"With gas prices also up this afternoon due to a tight European system, there was also upward pressure from coal's most important competitor for power generation," he added.

Despite the price rises on Thursday, the market outlook remained weak due to ample supplies and slowing demand.

"Ironically, as the global demand pie is getting smaller, supplies are increasing," said Michal Meidan, director of consultancy China Matters.

In the Atlantic basin, Colombian Natural Resources (CNR), owned by investment bank Goldman Sachs, plans to re-start coal exports and re-establish mining operations after the government helped broker a deal for its use of Drummond's Caribbean Sea port.

CNR suspended exports from its port in Colombia at the end of last year because its loading procedures did not meet environmental standards that came into force at the start of 2014.

In the Asia/Pacific region, Glencore Xstrata Plc and Tohoku Electric Power Co settled an annual thermal coal import contract for Japanese utilities at around $73.50 per tonne, according to trade sources and local media, down 14 percent from a year earlier.

"It doesn't surprise me given the outlook for coal prices," Tom Pugh, analyst at Capital Economics, said in reaction to the news.

"Renewables, shale gas in the U.S. are displacing it, eating into coal's market share."

Pugh added that weaker economic growth in China, combined with some governments shifting away from new investments in coal energy due to environmental concerns, was also bearish for the market outlook.

(Reporting by Henning Gloystein; Editing by Susan Fenton)