We have seen a sudden bullish sentiment on the European coal markets during the alst week. Only a week ago, a ton of coal for delivery in 2020 (API 2) cost 63.50 dollars. Monday however, the price level was around 68.50 dollars, an increase of 8 % in just a week.
For months however, the European coal markets have been bearish. Demand in Europe has been minimal due to high competition from the gas markets, which have overtaken large parts of the coal power’s share in the energy mix. Meanwhile, the supply has been abundant, and stock levels at the European coal terminals are large compared to previous years. Furthermore, the important Chinese market has not offered any support to stop the price falls.
The markets appear a bit uncertain as to what is causing the sudden increases, but there is likely just a sentiment, that the massive drops during the last few months have been overdone, and that we need an upwards correction now. When the market gets a feeling that there is a consensus to trade up, people join in on the sentiment.
Fundamentally, not a lot has changed to justify the increases, and the overall situation on the market remains bearish. We have seen increasing freight rates lately, which to some extend could be an explanation. It does however seem most likely that the market needs a correction. Therefore, it is questionable, if the development will continue during the coming weeks.
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There were major price climbs across the markets last week. Electricity, coal and gas prices are climbing as a
result of a major new price jump in the European carbon emissions allowance market.