by Dr Tim Jones,

The start of 2014 was a quiet one for coal shippers in the Americas as international coal markets took a while to warm up. With 1 January falling in the middle of the week there was little trade reported before the holiday, and there was a quiet start as players returned to work.

Ongoing severe weather in the north Atlantic had been impacting port operations in Europe and North America during early January. Shipping had also been disrupted, with coal loading and deliveries being delayed. Most of that tonnage is understood to have been for contract deals, but with some spot purchases due for loading and delivery at the time as well. The spot price of thermal coal in Europe had been subdued, with an expectation that Colombian supply would be sufficient. The market was aware, however, that Drummond was unable to load coal at the time following reports of an order to halt loading activities due to the issue over new legislation on barge loading. There were signs that the thermal coal spot price in Europe may have been firming as a result, and this was expected to have a knock-on effect on the spot market elsewhere. The Atlantic thermal coal spot price had started the year about US$3/t FOB (free on board) lower than in mid-December. Pacific and Asian thermal coal spot prices were about US$2/t less. Although the market appeared to be weak, the few signs seen in early January suggested that a slight firming was more likely than further falls during the course of the month. A flurry of trade was expected for some Pacific shippers in the Americas ahead of the Chinese 


New Year holiday, with a lull during that time at the end of the month. The coking coal markets around the world had been quieter during the holiday period with limited demand seen in the spot markets. In the US domestic markets, however, the price of Central Appalachian thermal coal firmed as a result of higher natural gas prices in the USA.

Limited demand led to a further softening in the spot markets in the early part of 2014. Atlantic supply was impacted by government suspensions of coal operations in Colombia, and more than 6mt (million tonnes) of thermal coal exports were estimated to have been lost during the first quarter of this year. There were substantial decreases in the freight rates in mid- January, with Capesize rates falling significantly on the coal route from Hampton Roads to Rotterdam.

At the time, the spot price of low vol hard coking coal in the international market from the USA was hovering around a small discount to that of the indicator brand in Australia. This suggested an indicator spot price at Hampton Roads of about US$131.80/t FOB which was some 50 cents down compared with the previous week. The spot price had decreased by a couple of dollars since the end of 2013. Spot deals were rare at that time, and sellers were involved in negotiations for quarterly contract supplies.They were therefore offering any tonnage in the spot market at prices in the high US$130s per tonne FOB which was well above what European steel makers might have been interested in. They appeared to be concentrating on blending coal for the best economic result in their operations.

In the USA in January, JEA Northside issued a tender seeking 105kst of thermal coal for delivery in 35kt cargoes during April to June to the Northside Marine Facility in Florida. Coal specifications included CV 11,000Btu/lb (min) and ash 18% (max).

In Colombia in January, Drummond declared force majeure following an order by the government to suspend its barging and floating crane loading operations. An analysis at the time suggested up to 6.5mt of coal exports could be affected during the first quarter of 2014. It was also uncertain if Drummond’s new port could be commissioned by 31 March, with a capacity of 60mtpa (million tonnes per annum). Meanwhile, in the USA the Arctic vortex led to freezing conditions in north America during January, with coal operations along the entire chain being affected. Conditions did not warm up back to normal until later in the month.

Thermal coal spot markets remained relatively quiet in all regions, but there had been a number of spot tender enquiries in Europe and Asia. The restrictions on Colombian supply saw further rises in the coal price in the Atlantic. As work resumed after the new year break, performance data for 2013 began to emerge, with records being set in some cases amid the apparent weakness in the commodities sector. Freight rates continued to decline on the major coal routes, except for the USA – Europe trips across the Atlantic.

In the USA, Southern Co issued tenders seeking a total of 4.5mst (million short tonnes) of coal. A spot tender requested offers for 1.5mst for delivery to several power stations during March to June, and there was a term tender seeking 1.5mstpa during 2015/2016. Imported coal would be considered, and specifications included CV 11,000Btu/lb (min).

The Colombian government imposed a fine of US$800,000 on Drummond for continuing to load coal at its floating crane and barge facility in January. All coal exporters were required to have direct loading ports by 1 January 2014, and Drummond’s loading operations were suspended on 13 January.


As February approached, a thaw in the US east coast ports was expected to relieve the freezing conditions which impacted coal operations there, and through much of the country. European spot market activity was still lacklustre, with some more seen in the eastern Mediterranean and Black Sea markets. Freight rates had eased again on all the major coal routes for Panamax and Capesize vessels. Overall, a softening in the spot price of thermal coal, and of freight rates had led to lower delivered prices into all areas around the world as February got under way. Hard coking coal prices had also been softening in the main spot markets in Queensland and the USA. While Drummond was restricted in its coal exporting from Colombia, there were reports that some European buyers had decided to wait for the miner to return to the international market in the expectation of lower prices after that. Freight rates turned around in early February, influenced by the stoppage at Richards Bay Coal Terminal which affected at least 1.5mt of coal vessel capacity and caused a backlog of shipping.


Alpha Natural Resources was reported to be planning to open a new sales office in London which was to be headed up by Nick Ingham.

The company would be targeting European customers for Central Appalachian coal in the coming years, and Ingham has relevant experience from his work with Drax in the United Kingdom.

In the freight market towards the end of February, the Panamax rate on the US Gulf to the ARA ports route decreased by more than US$2/t or almost 13%. The rates on the other main coal routes firmed, with the Capesize route from the US east coast to Rotterdam rising by some 3.5%. It was expected that loading of Panamax vessels would resume at Puerto Drummond after the middle of March. The new direct loading facilities were expected to be ready by then, but Capesize vessels were not expected to be loaded until later in April. This news served to ease concerns about supply in the coal markets at the time, and prices softened in the north Atlantic as a result.


Demand for thermal coal in Europe appeared to be limited to Russian, Colombian, and some Polish at the end of February, with the US exporters understood to be seeing little interest in their coal at the time. There had then been some strong rebounds in the freight market, with Capesize rates

on most of the major coal routes jumping by over 10%. In contrast, the Panamax rates on the major coal routes had softened slightly. New business for Colombian coal in particular was believed to have been done in the US thermal coal markets at the end of February. This had some influence on vessel availability in the spot freight market.Vessel congestion in the US Gulf area was also impacting freight rates. According to the U.S. Energy Information Administration in a report in February, the importance of coal exports would continue in the years to come despite the decrease in tonnage and value recorded in 2013.


Global coal demand and production challenges in China and India, as well as Australia, Indonesia, and South Africa will drive the US coal export sector. Modest growth in US coal exports is forecast to reach 160mst by 2040.

In parts of Asia there has been firmer demand for coal from north America over the past year, as reported in the Canadian port data published in early March. Neptune Terminals and Westshore Terminals reported a total of 38.1mt of coal was exported in 2013. This was an increase of 5.4mt or 17% compared to the total recorded in 2012. Of this total, coking coal contributed 25.9mt which was an increase of 3.3mt or 14% compared to the previous year. Thermal coal exports increased by 2.1mt or 22% to reach 11.9mt. The Asian markets proved stronger for the exporters through the port in 2013.

The European market had been reacting to the situation in Ukraine at the time, and concerns about the security of gas supply in Europe caused an increase in its price which led to a firming of the coal price at the start of March. The spot price of thermal coal in the Atlantic softened after tensions eased somewhat, but remained firmer as the situation continued to be uncertain. Coal trade in the Black Sea markets had been particularly challenging, and US and Colombian exporters stood poised for more business as buyers sought more diversity of supply sources. In the freight market, the Atlantic Capesize rates soared amid the Ukraine crisis.
The Atlantic thermal coal spot market started March with some firming as trade picked up. The first quarter of 2014 had seen some activity in the spot market in the region, but most of the tonnage being shipped appeared to be related to contract deals in Europe and the Mediterranean area. Spot prices have remained historically weak and in a relatively narrow trading range. There were some signs that a firming in the spot price for delivery to the northwest Europe ports could occur during the second quarter, with shipments for May picking up in deals at the time. Concerns about the supply of coal from Colombia remained a key factor in the spot market in the north Atlantic. Buyers from several consumers in Germany,Turkey, and the United Kingdom were understood to be in the market for prompt tonnage. Coal stocks on the pads at the ARA ports were reported to have decreased during March, and needed to be replenished. The spot market for coking coal around the world has not seen much more activity since the start of the year, and prices have continued to soften. Demand in regions outside China and India has not been strong, so the American coking coal exporters have been unable to forge better deals elsewhere.

In Colombia in March, Drummond had begun ramping up production in an effort to catch up with lost shipments during the stoppage at its loading facilities since early January. Similar reports had been received that Cerrejon Coal was also boosting output. Consumers remained jittery about Colombian coal supply, however, and this had been reflected in price volatility in Europe over the month. Meanwhile, the new Puerto Brisa facility in Colombia was to be commissioned in April. The port has the capacity to accept Capesize vessels.

As the Atlantic market was waiting to see if Drummond resumed coal loading in April, it was sending mixed messages to buyers and sellers. Some market sentiment suggested the price should have been softening due to the likely improvement in supply. Wary of being caught out if coal loading was delayed, however, the sellers and traders were said to be less willing to sell at lower prices just yet. European activity in the spot market remained lacklustre as coal burn had been lower amid the milder spring weather. Coking coal contract talks were still ongoing in Asia amid indications of lower spot prices and a weakening market, and the American shippers awaited the outcome.


In the infrastructure sector, reports suggested the Fenoco Rail line could link up with the Central Railway System by the middle of next year. The system is currently undergoing upgrades. Once the coal line is linked up, the coal producers in central Colombia would be able to rail their coal to the ports on the Caribbean coast to the north.

By the end of March in the Atlantic thermal coal spot market a recovery in Colombian supply was perceived, and some suggested there could be an additional 5–6mt of coal exported this year compared to last. Drummond opened its new coal port on 29 March.

The Atlantic spot market for thermal coal saw a few trades done at the beginning of April, with European buyers showing activity through electronic platforms for cargoes required in May. In the freight market, rates softened on the major coal routes for both Capesize and Panamax vessels. The Capesize rate on the Bolivar – Rotterdam route decreased by 10.64% and this was influenced by the start of coal loading at Drummond’s new facility which eased constraints on shipping in that area. Meanwhile in Europe there had been indications that some buyers had been considering their options regarding additional Colombian, Polish and US coals due to the potential situation with Russian supply following the Ukraine crisis. The US utilities started to come into the market, and Jacksonville Electric Authority issued a tender seeking up to 550kst of coal to supply its Northside power station in 50kt cargoes during June to September. Specifications included CV 11,000Btu/lb (min), and imported coal in Panamax vessels can be received at St John’s River Coal Terminal. Southern Company was in the market seeking up to 4mst of coal for delivery this year. Imported coal can be accepted in Handymax or Panamax vessels, with the overall tonnages being 2.5mst during Q3 2014, and 750kst during each of Q2 and Q4. Specifications include CV 11,100-13,000 Btu/lb and ash 8% (max).

During April, it became more apparent how major coal market players have been ceasing their activities in recent months, and this was likely to have an effect on some aspects of the international coal sector. Among these companies are Cargill, Deutsche Bank, Koch Carbon, Merril Lynch, and Total. Overall they had significant influence in the coal business, but have been operating in difficult conditions, particularly since the financial crisis.

Drummond was ramping up its new direct loading port facilities in April. Initial cargoes served as test material for the new equipment, with the operator finding performance to be better than expected during the first few days. By the end of this year the new port is expected to have a capacity of 60mtpa.

During April, lower spot prices for thermal coal in the international market coupled with low freight rates prompted some US consumers to enquire about new tonnage in the spot tender market. They are believed to have been aiming for offers of delivered prices in the mid-US$70s per tonne basis 6,000kcal/kg NAR. Canada's Nova Scotia Power was in the market with a tender seeking up to 200kt of low sulphur and low ash thermal coal.

Germany's coal imports increased in 2013 to reach 50.6mt.

This was 6.7mt or 15.3% higher than in 2012. The main supplier to Germany last year was Russia, with 12.5mt or 24.7% recorded, closely followed by the USA with 12mt or 23.7%. Higher coal burn in the wake of the nuclear closedown after the Fukushima disaster in Japan had been expected.

During May, the Atlantic spot market has been weaker with the main buyers in Europe showing little interest in prompt trade. Coal stocks are understood to be adequate at present, and the approach of warmer weather is seeing lower coal burn. Colombian supply is believed to be satisfying most European and US import demand at present. US interest in imported coal on term contract basis is continuing with new enquiries announced. In the domestic market, Southern Co has been seeking sub- bituminous coal from the Powder River Basin with offers on a FOB mine basis. There were two options, with the first seeking up to 400kst per month during June to September 2014. The second option sought up to 400kst for delivery during October to December 2014. East Kentucky Power was seeking up to 1.44mst of coal to supply the Spurlock power station. Delivery of 40kst per month for at least three years starting in January 2015 is required. Specifications include CV 11,000Btu/lb (min).

After a disrupted start to 2014, Colombian coal mining appears to be performing more strongly than has been thought. The government has released the latest statistics for Q1 2014 which indicates that total coal output reached 24.55mt which was an increase of more than 33% compared to the 18.4mt recorded in the same period last year. The data from the National Mining Agency is comprised mainly of production from the big three miners operating in the country; Cerrejon, Drummond, and Glencore. The total for Q4 2013, however, was higher at 25.5mt and was during a period before the loading ban affected Drummond, as well as no disruption from industrial action.

At the time of writing, there have been strong signs that the long recession and global economic downturn is finally over. This is good news for the commodities sector which has been hit particularly hard over the past few years. Some major miners are now looking to invest in growth as they perceive the economic climate is improving. During the course of 2014 and beyond, we could see some real improvements in the international coal industry compared to the past five years or so, and the slump in stock market values of many coal companies could begin to recover. On another optimistic note for the Colombian miners, coal production and transport could be set to improve, from a weather perspective. Forecasters have suggested that the El Nino phenomenon will cause drier weather during the second half of 2014. So, the climate could be changing in more ways than one.