European coal prices are set to fall further this week and could slump to a new multi-year low amid concerns about the impact of the China-US trade war.
“Everybody will focus on the trade war,” said a commodity analyst with a European firm, noting the API 2 window “depended much more on Chinese economic [data]” than on related markets.
The front-year coal contract could maintain its bearish trend and hit USD 65/t in the current week, extending a two-year low seen on Friday at USD 66.80/t on Ice Futures, he added.
“Deepening political rifts between the world’s two largest economies have reduced risk appetites substantially as investors deliberate looming weakness in global growth,” analysts from Phillip Futures said in a research note on Monday.
The market saw reduced activity on Monday due to a bank holiday in the UK. The front-year contract was last seen in a USD 66.60-67.75/t bid/ask range, compared to USD 67.10/t on Friday.
Closer in on the curve, the front quarter was last seen at USD 59.50-60.50/t, compared to USD 59.85/t.
Chinese weakness was set to offset bullish influence from the oil market, after a “sell-off” on Thursday was followed by a marginal recovery, the analyst said.
The front-month contract for Brent crude North Sea oil traded last up USD 0.05 at USD 68.74/bbl on Ice Futures.
China was in a “wait-and-see” impasse, as domestic coal production lost momentum but consumption remained flat, said a Switzerland-based coal trader.
“China was totally bearish a while ago, then it gathered some strength, but it didn’t really take off,” he added.
Meanwhile, the gas market could reduce its bearish influence over the API 2 window after several weeks of multi-year lows in the Dutch TTF hub, the trader said.
“Everybody is so bearish that [the gas market] has reached its limit,” he added.
The front-month gas contract in the Dutch TTF was last seen flat at EUR 12.25/MWh, though it reached EUR 12.11/MWh earlier in the session, the lowest since mid-September 2016.
Yet European coal fundamentals were set to remain unchanged in the near future, with low demand and high stocks pressuring the market, the trader said.
From a technical standpoint, the Cal 20 contract faced some further bearish pressure and could test the next support level at USD 66/t in the current week, said Tom Høvik, Montel’s head of technical analysis.