Coal trade in the Americas has been largely influenced by weakness in the Atlantic markets during the past few months, and by industrial disputes in Colombia. Last year saw a large number of job losses in the US coal industry, and there was apprehension about the presidential election during the autumn. The death of Hugo Chavez in March has generated questions about the future of the Venezuelan coal industry after years of decline. Brazilian economic growth is expected to get a boost from the Olympic Games there in 2016, but coking coal shippers in Canada and the USA have not reported a significant improvement in seaborne trade there so far. Central American activity in the coal markets has been subdued, and Mexico’s occasional large tenders have yet to return. There have been some disruptions to port activities ranging from a collision in Canada to environmental issues in Colombia, but the relatively lacklustre demand has prevented any substantial increase in coal prices. The market in the Americas did, however, reach its lows at the start of the second half of 2012 and US and Canadian exporters have been hoping for renewed opportunities in Asia if Chinese demand in particular begins to re-appear.

During the past month or so, thermal coal spot markets have been a little softer in most producing countries, although supply constraints continued to keep Colombian prices up. The Venezuelan market is also firmer, but on a smaller scale. The coking coal markets have been quiet, with a little softening seen in the US ports amid limited activity. BHP Billiton Mitsubishi Alliance is rumoured to be close to settling the new quarterly contract terms with Japanese customers, but in general the global steel sector is showing relatively little growth in demand for raw materials. In the freight market, Panamax rates have been firming as grain shipments from South America showed their seasonal increase.

Capesize rates, however, have been softer in general, with some steadying seen on most of the main coal routes at the time of writing.

The spot market for hard coking coal has been quiet on the US east coast during March. European buyers were expected to be looking for tonnage, but there appears to have been a lull in their activity. The spot price of low vol material has softened a little and the indicator price is US$157.50/t FOB (free on board) at present. High vol product is priced at US$145/t FOB in a lacklustre market.

Further south, in Venezuela, following the death of President Hugo Chavez, the international coal sector has been speculating on the chances of the decimated coal industry recovering in the coming years. Until overseas investors are welcome again, that is unlikely. Coal production has declined to some 2mtpa (million tonnes per annum) from around 8mtpa at the industry’s peak. The accompanying chart shows the trend in the spot price of thermal coal during the past few years.


Union members at Cerrejon Coal recently voted in favour of the new enterprise bargaining agreement. Their strike which had been ongoing for almost four weeks was over in early March, but about 2.6mt (million tonnes) of production was lost. The agreement includes a pay rise of 5.1% plus a bonus of US$7,000. European spot market activity remained subdued, with the force majeure situation in Colombia having limited effects on prices.

In February, the hard coking coal export market on the US east coast was lacklustre, as quarterly contract talks brought the spot market to all but a standstill. The spot price of low vol material was at US$158/t FOB in late February, but some players were anticipating a price of up to US$175/t FOB for the next quarterly contract. The spot price of high vol material was US$146/t FOB at that time. Freight differentials appear to be the main reason for the lower price of US coal in the international markets, particularly in Asia, where the Australian competitors have an advantage. Quality issues are contributing less to the price differences among broadly equivalent coal brands in the supplier countries at present. Meanwhile, another attack by terrorists on Cerrejon Coal was carried out on 24 February during the ongoing strike at its operations. Four coal trucks were seen as easy targets and were seriously damaged.


During February, thermal coal spot markets softened in all markets except Colombia where the industrial action and environmental issues tightened supply to the ports. Reports suggested only 20% of normal coal supply could be shipped at the time. Some interest in Polish and Russian material had been reported as buyers looked at other sources of coal in northwest Europe. US exporters were also been receiving enquiries from buyers in Europe in order to cover potential cancelled cargoes as the Colombian situation persisted.


The industrial action by union members at Cerrejon Coal appeared no closer to being resolved as negotiations on the new enterprise agreement broke down.

There were reports of several small deals in the domestic market for hard coking coal in the USA. Spot prices at the east coast ports firmed a little as a consequence, and low vol material was priced at about US$158/t FOB. The spot price of high vol hard coking coal also firmed slightly to about US$146/t FOB. There seems to have been an expectation of higher prices among US market players than their Asian colleagues expected at the time, with reports of US$180/t being considered possible by some for the reference low vol material.


In the middle of February, the industrial action in the key supplier countries of Australia and Colombia had caused acute modest hikes in the spot price of thermal coal, but market players were understood to have been showing little anxiety about coal supplies being seriously tightened. It was felt that if the situation was not resolved soon, the pattern could have continued with a rise in the spot price being seen in relatively small steps during those conditions. At that time, reports indicated that some cargoes of US thermal coal had been sold to Japan in the previous weeks, and the latest data indicated higher coal burn among the electric power companies there. The coking coal market had remained quiet, but there were signs that lower quality hard coking coals were beginning to achieve firmer prices in the spot market. For reference brand quality, European buyers were rumoured to have been paying up to US$175/t FOB for Australian material in early February. The steel makers were understood to have been adjusting their blends amid the demanding market conditions. In Europe, higher gas prices kept interest in other fuels at the top of the fuel managers’ agenda, but a substantial increase in demand for coal and a consequent rise in the price has not been evident. Polish, Russian, and US thermal coal is understood to have been of more interest recently than South African material. There were some signs of activity in Brazil when CSN issued a tender seeking 50kt of metallurgical coke in mid-February. Meanwhile, US shippers had been negotiating quarterly contract terms with the European steel makers who are interested in lower cost material for their blends over the coming months. Mid vol hard coking coal had seen some firming in price due to the improvement in demand for such material. The indicator spot price for the reference brand of low vol coal was US$157/t FOB on the east coast in mid-February. High vol coal was priced at US$145/t FOB. Although business remained thin for US coking coal shippers in early February, there were signs that the firming of the spot price in the Australian market was having some influence in the hard coking coal spot market in the eastern US ports. Low vol material was thought to be selling for over US$157/t FOB which suggested an increase of more than US$2/t FOB in a week. High vol coals had not been seeing as much of an increase in demand but sellers were understood to be asking over US$145/t FOB at that time. At the time, the Brazilian steel makers were rumoured to be purchasing B grade high vol US hard coking coal for as little as US$120/t FOB, but no deals had been confirmed at that price. Further north, in Canada, Compliance Coal was reported to be proceeding with its plans to develop the new Raven underground coking coal mine on Vancouver Island. Up to 700ktpa of coking and PCI (pulverized coal injection) coal could be produced and would be shipped from Port Alberni. In port news, following the damage on 7 December to No 1 Berth at Westshore Terminals in Canada, repairs were expected to be completed by the end of March (for more details, see ‘How one night of disaster can change your whole year’ on p71 of the February 2013 issue of Dry Cargo International). A conveyor was damaged when a ship collided with it, and it was expected to take some time to repair the pier at Berth 1. There were limited reports of disruption to exports of Canada’s coking coal in the Pacific markets, but market fears led to a rise in the spot price as the incident was expected to have an impact on supply in the following weeks.


During early February, Drummond was reported to have had its operations at the port of Santa Marta suspended following an incident in which coal was allegedly lost overboard from a barge on 13 January. The suspension led to disruption of coal supply which exacerbated the constraints caused by the industrial action at Cerrejon Coal. There had been a 97% majority vote in favour of industrial action over wages among the 4,500 union members. The union was demanding an increase of 7% in wages this year, with further increases next year. Meanwhile, FARC terrorists carried out their first attack of 2013 on Cerrejon Coal’s operation on 21 January. A coal train sustained minor damage and railings were delayed for a couple of hours while the track was repaired.


Also impacting coal supplies in early January, haulage on the Fenoco rail line through residential areas was banned during the night due to environmental issues including noise.

Colombia’s National Mining Agency has forecast coal production growing to 98mt in 2013 with an average price of US$75/t FOB. To 2020, output is forecast to peak at 107mt during 2016–2018 with annual average prices at US$79, US$84 and US$87/t FOB respectively. Production in 2020 is forecast to be 103mt with an average price of 92/t FOB.


This year began with weak thermal coal spot market activity, with a similar situation in the coking coal spot markets. There were few significant factors set to influence the position, with a plummet in the price of Chinese coke and some disruption to Canadian supply being the most noticeable. There had been reports that Canadian coal producers were having problems hauling coal by road and rail to the ports on the west coast due to snow and ice during the winter freeze. The possible tightening of supply of Canadian coking coal failed to show any impact on the spot markets. Further south, there was optimism that the Brazilian steel sector will pick up this year, ahead of the Olympic Games and soccer World Cup events there.


Steel makers were reported to have settled contract supply of US PCI coal for 2013 at prices in the low US$70s per tonne at the start of the year. Such prices are unsustainable for some operations, and further production cuts were expected at some mines in the coming months.

Rumours had been circulating in early January that some German utility buyers had been planning their approach to coal procurement for the second quarter of 2013 and beyond. While a number of customers had already agreed substantial tonnage in the wake of reduced nuclear power output, there was still a need for more thermal coal to be purchased in the spot and spot tender markets.The buyers were expected to be aiming for coal to be delivered to the ARA ports at prices close to US$90/t CIF (cost, insurance, freight) basis 6,000 kcal/kg NAR (net as received), and this was of interest the US traders at the time.


Looking further back at the factors influencing coal trade in the Americas as 2013 got under way, thermal coal spot markets had remained rather calm over the holiday period in December, with little movement seen in the prices around the major markets. The spot market in northern regions had been expected to firm during the first quarter of 2013 due to seasonal increases in demand for thermal coal, and it was felt that a rise could have a knock-on effect on thermal coal spot prices in the southern hemisphere markets as well. Market analysts appeared to have taken a mildly bullish sentiment to the coal market in 2013, with an overall improvement expected over the course of this year compared to 2012. US exporters were taking some comfort from the expectation of renewed demand from parts of Europe this year, with Germany being seen as one market to tap. Colombia’s plans to expand coal production, however, could compete with other suppliers’ hopes for Europe. China had been importing record monthly amounts of thermal coal according to the latest data, and market players did not appear to believe this would change much for the coming months. An increase in the price of natural gas was expected to see renewed consumption of coal in some major economies including the USA. One market being watched more closely was South Africa, which some players believed could see growing demand from Europe. India and China were expected to show continued growth in demand, which could influence Atlantic markets. Coking coal spot markets had yet to show much activity after the holiday break, with little business being reported in early January. So overall, the initial expectations for the international coal industry as 2013 got under way were not as depressing as they had been for the past couple of years, and analysts and observers believed there could be some more positive aspects this year. The year had also begun with a firming in the freight rates on the major coal routes.

Towards the end of 2012 in the USA, it was decided that expansion of the rail network in the Powder River Basin was being postponed due to the downturn in demand for coal in favour of natural gas in the US power market. Canadian Pacific will not be proceeding with its 260 mile track extension for the time being.

The US coking coal shippers were not benefitting from the renewed demand seen in Asia during November, with Atlantic business still subdued. European demand was particularly quiet, and rather than an increase in the spot price, there had been a drop in the indicator price to around US$158/t FOB for low vol  product. High vol hard coking coal was priced at about US$150/t FOB at the end of November, which was a decrease of US$2.50/t FOB compared with the week earlier. As the US shippers began to look at the export market after agreeing most of their domestic business, there was a perception that the supply of hard coking coal had picked up. This had met with limited demand which appeared to have led to a fall in the spot price.


On the demand side at that time, Chile’s Guacolda had awarded the contract to construct a new 154MW unit at the Huasco coal-fired power station to Mitsubishi Heavy Industries. Commissioning of the unit is expected in the second half of 2015.

In the USA, Southern Coal had signed an LT coal supply contract with American Electric Power. As a result, the company expected to reinstate 500 workers who were retrenched earlier in 2012, and would also be seeking an additional 650 workers to help meet the target output of 9mt of coal in 2013.


Towards the end of November, thermal coal spot prices had firmed in the Atlantic markets, with spot deals being seen for Colombian coal in the USA, and US coal winning some spot tender business in the Mediterranean market. Rumours suggested the Spanish coal consumers were looking at new business with US and Colombian shippers at the time. Coal burn had been higher there in the previous weeks, and coal stocks had been depleted somewhat.

A number of key marketing managers and coal buyers had been attending the Carbon Forum in early November, with 

some new business expected to result from the meetings. Rumours suggested European buyers in Germany, Israel, Spain, and Turkey were actively seeking coal. The outcome of the discussions did not, however, give a particularly strong indication of the direction the market could be expected to take in the following months, both in thermal and coking coal business. Peabody Energy had been the latest major mining company to report disappointing operating results at the end of October, with a 10% or US$25m decrease in EBITDA year on year. The company announced job losses for 925 workers around its worldwide operations, with a plan to cut costs by some US$100m. Meanwhile, Canada’s Teck Resources achieved an average price of US$163/t FOB for 6.2mt of hard coking coal for supply in Q4 2012. The reference price of US$170/t FOB applied to its equivalent brand, with differences on others relating to quality adjustments.

After a disappointing and challenging first half of 2012 for coal trade in the Americas, the situation improved as the northern summer drew to a close. The improvements seen in some countries during the autumn began to level off as the holiday season approached, and as some analysts had predicted, the gains reached a plateau at year end. While markets have not returned to the depressed levels of a year ago, there has been no further indication of significant growth during the first couple of months of 2013. The disruption to substantial production of coal and supply from Colombia has been a key factor in keeping coal prices relatively steady, so players will be watching how Atlantic trade develops over the coming months now that the situation has been resolved. Further financial crises in the Eurozone are not helping to boost the European economy at the time of writing, so the first half of 2013 looks set to be as challenging for coal shippers in the Americas as it was in 2012. This year the coal exporters will be hoping for new business from the improvements in China, and the boost to the Brazilian economy from the sporting events there which could help trade during the next few years. 

Dr Tim Jones is Director of Consultancy and Editor of the weekly publication Coal Market Intelligence which covers 11 spot markets worldwide, gives key information on the latest deals and tenders, company news, people and jobs, industrial relations, and ports, shipping, and freight rates.