European Coal Rises to Record on Limited Supply, Power Demand

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

17 May 2008

Coal for delivery in northwest Europe rose to a record on limited global supplies of the fuel and demand in countries such as India where new power stations are being built. Domestic supplies of Indian coal lag behind demand and state-owned Coal India Ltd. is seeking mines in countries including Australia and Indonesia to secure supplies. Users in the country have increasingly bought coal from Richards Bay, South Africa, Europe's biggest source of the fuel for power. "We are in a long-term pattern because the world is building a massive amount of coal-fired generation,'' David Khani, an Arlington, Virginia-based analyst with Friedman Billings Ramsey & Co. told Bloomberg Television. ``Current supply is definitely running under global demand.''
India is undersupplied with power while China, the world's most populous nation, is building ``essentially'' a coal-fired power plant a week, Khani said. Power plants fired by coal are also being built in Europe, Russia and South America, he said.
The 27-nation European Union uses coal for about 30 percent of its power. Generators paid record prices for the fuel this year as Australian floods and Chinese storms curbed supplies constrained by rail and port bottlenecks.
Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year rose as high as $152.25 a metric ton today. The contract traded $2.25, or 1.5 percent, higher at $152 a ton at 4:23 p.m. in London, ICAP Plc prices supplied to Bloomberg show. ICAP has about 30 percent of trade in coal derivatives, financial instruments used to bet on future prices.
Haulage Costs
German coal consumption jumped 3.5 percent in January as colder weather increased demand, latest available government statistics showed today. Electricity generated in the country by burning hard coal and lignite climbed to 24.3 terawatt-hours in the month from 23.5 terawatt-hours a year earlier.
Haulage costs accounting for as much as half the price of delivered coal rose to a record. The Baltic Dry Index, a measure of costs to ship commodities, advanced 392 points, or 3.5 percent, to 11,459 points in London today.
Utilities in the EU need permits to burn such fossil fuels. Coal needs twice as many permits as cleaner natural gas, and generators may shift to gas when it becomes more profitable. RWE AG's Didcot A generator in the U.K. is one unit that can switch between fuels.
A U.K. power utility could make a profit of about 18.53 pounds ($36.26) a megawatt-hour burning Dutch-delivery coal compared with 8.41 pounds burning U.K. natural gas in the six months through September 2009, the clean spark-spread and clean dark-spread show.
The spreads are calculated using the forward prices today for power, gas, coal and permits from energy brokers and exchanges published by Bloomberg.

Source: Bloomberg