Coal May Lose a Fifth of its Value This Month on Market Turmoil

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

30 Sep 2008

European coal headed to a more than 20 percent drop for September on a credit squeeze in financial markets that saw banks such as Lehman Brothers Holdings Inc. fail and left U.S. lawmakers grappling with a rescue plan.  ``It's uncertainty on every front,'' Emmanuel Fages, an analyst with Societe Generale in Paris, said in an interview today. Financial markets are seeing withdrawal, he said.
Contracts for coal delivered at Amsterdam, Antwerp, or Rotterdam with settlement in 2009 fell 0.5 percent to $148 a metric ton at 3:31 p.m. in London. That's a 21 percent drop for September and 30 percent for the quarter. Data are from ICAP Plc, GFI Group Inc., Spectron Group Ltd., Tullett Prebon Plc and TFS.
U.S. lawmakers last night defeated legislation aimed at restoring confidence in the country's banking system via the biggest government intervention in the markets since the Great Depression. A U.S. housing slump sparked the crisis, uncovered bad debt and led to a global lending squeeze.
Coal prices fell this month on freight rates that account for as much as half the price of delivered coal. Rents for so- called capesize vessels to ship the fuel and iron ore fell 65 percent on weaker Chinese steel demand as construction slows. Mills shut to curb pollution for the Beijing Olympics and Paralympics stayed closed.
Fewer Vessels
Rates may weaken after the number of ships waiting off Newcastle, Australia, site of the biggest coal-export terminal fell to 28 as of 7 a.m. local time yesterday. That's one less than a week earlier and below an average 33 for this year. Coal shipments from the harbor dropped 11 percent.
Power utilities in the 27-nation European Union need permits to burn fossil fuels, with coal requiring twice as many as cleaner natural gas.
A U.K. power utility could make a profit of about 26.83 pounds ($48.20) a megawatt-hour burning Dutch-delivery coal compared with 19.22 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.
Coal generates about 30 percent of power in the 27-nation European Union, according to Brussels-based lobby group Euracoal.

Source: Bloomberg