LONDON, March 18 (Reuters) – Thermal coal futures were firm on Wednesday, consolidating in a lower range, after the market erased gains made on speculation that supply cuts could outweigh weak demand.
European API2 2015 coal futures were up 0.9 percent to $58.25 a tonne, after a week of lower closes, holding near a nine-year low of $55.60 hit on Jan. 26.
Gains made in February following plans by the top exporter of coal for power generation, Glencore, to cut its 2015 global coal output, proved short-lived.
“It certainly had a knee-jerk reaction in the market, the market moved up quite strongly on it,” a broker said.
“Now people have had time to digest it and see how much of an impact that’s really going to have prices are correcting back down.”
Glencore expects its 2015 coal production at around 138 million tonnes, down 8 million tonnes from the previous year.
The world’s top importer of coal, China, however, has seen a sharp fall in shipments so far this year, mitigating the impact of Glencore’s supply cut.
Macquarie Bank estimated Chinese imports could drop by around 38 million tonnes in 2015, after a weak start to the year.
“The general conclusion is that there is no other importer capable of absorbing such a large volume of material and that prices should fall to low enough levels for supply cuts to occur,” the bank said in a note.
In Europe, U.S. coal imports have slowed to a trickle, while Colombian and Russian imports have replaced them.
Colombia’s second-biggest coal miner, U.S.-headquartered Drummond, is sustaining regular exports despite new restrictions on using the Andean country’s main coal railway and has ample stocks for now. (Reporting by Sarah McFarlane; Editing by William Hardy)
http://af.reuters.com/article/southAfricaNews/idAFL6N0WK4ZP20150318