The European coal market has maintained its position as the least visibly active in the world coal markets this year, and this has continued now for more than two years. Consumption of coal for power generation and steel production has been subdued, and the European buyers have been much less visible than those in Asia. European coal producers also operate at a much smaller level than those in other continents. The problems in the Eurozone have had a lasting impact on the general economy in Europe, and it is only recently that there are signs that the region has come out of recession. Some coal producers have continued to suffer, and in the United Kingdom in particular, one company was put out of business completely when government-imposed carbon emissions taxes seemed to be the final straw. Numerous jobs were lost, with adverse knock-on effects on related traders and investors. Meanwhile, the United Kingdom continues to import coal from other sources such as Russia, Colombia, and South Africa.

At the beginning of 2013, thermal coal spot markets had remained rather calm over the holiday period, with little movement seen in the prices around the major markets. The spot market in northern regions including Europe was expected to firm during the first quarter of 2013 due to seasonal increases in demand for thermal coal, and a rise would have had 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, were expected to compete with other suppliers’ hopes for Europe. An increase in the price of natural gas was expected to result in renewed consumption of coal in some major economies including the USA. One market being watched more closely at the time was South Africa which was expected see growing demand from Europe. India and China were expected to show continued growth in demand, which would influence Atlantic markets. Coking coal spot markets had yet to show much activity after the holiday break, with little business being reported. 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 some more positive aspects were anticipated this year. The year also began with a firming in the freight rates on the major coal routes.

Back in January, rumours had been circulating in Germany that some 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 (Antwerp– Rotterdam–Amsterdam) ports at prices close to US$90/t CIF (cost, insurance, freight) basis 6,000kcal/kg NAR (net as received).

European customers were interested to note at the start of this year that Colombia’s National Mining Agency had forecast coal production growing to 98mt (million tonnes) in 2013 with an average price of US$75/t FOB (free on board). 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. A few weeks later in early February, workers at Cerrejon’s operations went on strike following a 97% majority vote in favour of industrial action over wages. The union was demanding an increase of 7% in wages this year, with further increases next year.

Dutch trader, Vitol secured the marketing rights to coking and thermal coal produced by Coal of Africa Limited. Vitol is expected to target some new business in Europe after the swing to India and other countries in Asia by the South Africans in recent years.

In February, there were reports of some buying activity in the European steel sector, but not for US or other coking coal. Instead, the Australians seemed to have picked up some business despite the disruptions to the supply chain in Queensland due to flooding. That may, however, have been the reason for buyers and traders purchasing cargoes after becoming concerned about a possible price rise in the ensuing months. At that time, the spot price of PCI material was said to be approaching US$150/t FOB as well.

In mid-February, US shippers began negotiating quarterly contract terms with the European steel makers who were interested in lower cost material for their blends over the ensuing 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 at the time. High vol coal was priced at US$145/t FOB. The coking coal spot market had been 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 had not been evident. Polish, Russian, and US thermal coal had been of more interest than South African material.


Some companies were able to report good results earlier this year. Xstrata reported a record production result for coal across its global operations. Total output reached 90.4mt in 2012 which was an increase of 7% compared to the previous year. The increase came from thermal coal output, and although coal had shown positive results the company’s share price movement had remained unexciting.

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

In the United Kingdom, the Cockenzie, Didcot A, and Kingsnorth power stations closed this year. European emissions regulations led to plans to close a number of older major coal- fired plant across the country.


The ending of the strike at Cerrejon Coal in Colombia in mid-March reduced pressure on thermal coal supply in the Atlantic, and it was shown that the major buyers in Europe had adequate stocks of coal to comfortably see the strike through. Other shippers had been hoping for more business and better prices if the industrial action continued. Although US and Russian exporters are believed to have benefited to some extent in the European and Mediterranean markets, the shippers further afield including South Africa do not appear to have reaped much reward.

By the end of the first quarter of this year, Baltic shippers were rumoured to have been receiving new enquiries for coal deliveries in the United Kingdom and Rotterdam as the warmer weather approached. Russian and Polish material had, however, softened in price in the spot market in line with the general trend in markets around the world at that time. In Croatia, buyers were back in the spot tender market seeking 11 Panamax cargoes of coal for the Plomin power station. Their tenders are among the most visible and regular of the European market.


The European coking and thermal coal markets began the second quarter rather quietly, although contract business was clearly showing coal deliveries were continuing into the ARA ports and the United Kingdom. Russian coal continued to be purchased by the UK generators, and higher sulphur material at discounted prices from the USA and elsewhere was still of interest to those consumers with scrubber technologies at their plants. There was also renewed thermal coal spot tender activity in Eastern Europe in April, and spot market activity on electronic platforms picked up. A Panamax cargo of Polish coal was reported to have been purchased by a Turkish customer for prompt delivery at a price of under US$80/t FOB in mid-April.

The relatively soft price of thermal coal in the Atlantic market did not correspond with some reports that the European utilities had been keen to buy coal in April. The material to supply some of them may have been taken up from the pads at Rotterdam, but coal stocks at the ARA ports were said to have been depleting during the previous few weeks. The cold snap in northern Europe had kept up demand for electricity and coal, which could have boosted spot prices above prevailing levels. The renewed availability of Colombian coal, however, would have countered upward pressure on the spot price to some extent. Traders also reported that thermal coal to supply Europe was available at Richards Bay when any enquiries arose. Russian supply to northern Europe was relatively tight due to the persisting frozen conditions affecting shipping.


As April progressed, European buyers had been taking some US tonnage in the thermal coal spot tender market. Coal stocks were understood to have been building in Europe as contract tonnage arrived at the ports, and this had been sending some signals to suppliers that demand would be more subdued in the spot markets.

In early May, there were reports from traders that US thermal coal had been offered to European customers at about US$85.00/t FOB during the previous week. At the time, coal exporters had been seeking higher FOB prices at the east coast ports because of the increase in rail costs in the country this year.

In corporate news, the merger between Glencore and Xstrata was completed on 3 May, although it was being seen more by some as a takeover by Glencore. Glencore’s CEO Ivan Glasenberg became the CEO of the new entity GlencoreXstrata, and a number of Xstrata offices are being closed.

In May, Germany’s RAG announced that it is to cease all coal mining in the country by 2018. German coal-fired power stations will, however, still require supplies which will need to be secured from overseas. Portugal’s EdP was rumoured to have been active in the market in May, and is understood to have purchased around 500kt of coal from Colombia for delivery next year. Some reports suggested the price was in the mid-US$70s per tonne basis 6,000kcal/kg NAR.

Ukraine’s coal exporters were successful in Morocco around that time, when Office National de l’Electricité is understood to have purchased coal following its earlier tender seeking 3×38kt cargoes. The price was rumoured to have been about US$74.50/t FOB basis 6,000kcal/kg NAR. Delivery was required to the Jerada power station in June and July. There had been activity in some apparently quiet markets during the year, and in May the market noted the US government had reported that exports of thermal coal totalled 6.22mt in March which was an increase of 25% compared to the same month in 2012. Europe accounted for 3.8mt or 61% of this.

Some parts of Europe and China were understood to be seeing greater availability of hydroelectric power in May, and demand for coal was expected to decrease in those areas in the ensuing weeks. Thermal coal spot prices had decreased in the Atlantic in the middle of May, with European interest waning over the course of the first couple of weeks. Renewable sources of electricity were reported to be having an impact on coal demand in Italy, Spain, and Portugal in particular at that time. Turkey’s Colakoglu Metalurji had been in the market, however, seeking a single Panamax cargo of thermal coal for delivery in late June or July. Russian shippers were said to have been keen, although some US material may have been attractive as well. There had been reports that Turkish consumers had been booking several cargoes of Russian coal for delivery in the July and August. In that market, Colombian and South African material was unable to compete successfully at the time, with the freight advantage playing a part in this as well as quality of the coal. European demand for thermal coal was easing overall as the summer got under way, and steady deliveries of previously booked Colombian and South African tonnage have been reported.

Finland’s Fortum has not been in the news much recently, but reports in June suggested there are plans to reduce electricity generation at the Inkoo coal-fired power station.

Rumours suggested the plant could even be shut down permanently.

Higher stock levels contributed to the softening in the spot price at Richards Bay in June, and Atlantic trade had been weaker as the northern summer got under way. The hot spell in the United Kingdom, however, had not been seen throughout Europe that month. Extra electricity demand from air conditioning was yet to emerge across the region in general. Polish and US high sulphur thermal coals were understood to be readily available and could compete with Colombian and South African material into the ARA ports. Russia’s coal production during January to May had increased by 1.2% compared to the same period last year, to reach 143.7mt. 

Coal exports increased by 6.8% to reach 55.6mt. Thermal coal comprised 46.8mt of that, but there was an increase of 3.69mt in coking coal exports to reach 8.75mt.

Coal-fired power generation in Germany grew during Q1 2013 with coal consumption rising by 14.5% to reach 15.8mt. Following the reduction in nuclear power across the country in the wake of the Fukushima disaster in Japan two years ago, Germany has been importing more thermal coal in 2013. Total coal imports reached 13.6mt during Q1 which was an increase of some 10% compared to the same period last year. Thermal coal imports increased by 20% or about 2mt during the first quarter this year. The decline in domestic coal production continues to put more reliance on imported coal amid the move away from nuclear power. No German coal is expected to be produced after 2018.

Russian exporters were understood to have been making fresh offers of coal in Europe in mid-July as supply from Colombia was tightened. There appeared to be significant tonnage available in Russia where stocks had been built up at some mines. Maintenance work on the rail system over the previous couple of months had hindered deliveries to the Pacific market, and the European and Mediterranean buyers were seen as the option to focus on at that time. The seasonal lull in coal burn in much of Europe, however, meant there had been limited interest at the then current spot price of around US$73/t FOB basis 6,000kcal/kg NAR. Some substantial deals were anticipated before the start of the northern Autumn as buyers prepare for their winter demand.

The industrial dispute by workers at Drummond which resulted in strike action in July, had an effect on coal markets in the north Atlantic, with a slight rise in the price of coal delivered to Europe. The strike was disrupting production and ship loading in Colombia, with about a third of the country’s coal supply affected. Demand for coal in the spot market was still relatively quiet in Europe, however, and supplies from the USA, Russia, Poland, South Africa, and elsewhere appeared to be adequate to prevent much of a firming in the spot price. Force majeure had been declared on a number of cargoes, and vessels were being delayed at Puerto Drummond and some had been diverted elsewhere. European traders had been locking in tonnage for delivery in 2014 from other supplier countries in reaction to the tightening of supply from Colombia.

During the first week of August, traders have indicated that US thermal coal had been on offer on the east coast for under US$70/t FOB basis 6,000 kcal/kg NAR. Some European interest is believed to have been shown in high sulphur product which is reported to be on offer at the US Gulf ports for some US$10/t FOB less.

Despite the opportunity to purchase thermal coal for prompt delivery at low prices in mid-August, one of the main reasons many buyers have been unable to cash in is believed to be the lack of space on their pads. Coal stocks were reported to be high with little room for buyers to manoeuvre. Consequently, the delivered spot price had been easing at the time.

In the United Kingdom, a new company, UK Coal Production Ltd has been formed in order for mining to continue at the remaining UK Coal mines. A fire led to the closure of the Daw Mill colliery, and two underground mines and six opencut mines remain. These have a capacity of some 5mtpa overall.

Overall coal demand in Europe this year is forecast to be in the region of 190mt which is a decrease of some 10mt from last year. A combination of plant closures and environmental regulations is having an effect on coal consumption in some countries such as the United Kingdom and Spain. Consumption in Finland and France is expected to be a little lower this year. Italy’s economic situation has not been good for coal, and the availability of other power sources such as hydroelectric generation has been displacing coal. There are, however, expected to be some increases in coal demand next year. Demand in Germany is forecast to recover as new plant requirements ramp up, and a similar increase is likely in The Netherlands and Turkey. Overall, coal demand in Europe is forecast to increase by around 5mt in 2014 to approximately 195mt and half of the increase, some 2.5mt could be attributed to Germany. Denmark’s coal demand for this year could also result in an increase, possibly by around 1mt. Compared to the sentiment prevailing at the times of writing about European coal trade in the previous couple of years, there are some signs that 2014 could be the year when things start to improve for the coal sector. It will be interesting to see what delegates have to say at the Coaltrans conference in Berlin in October. While an improvement for coal trade may have come too late for some operations in Europe, it is clear that in the years ahead in key areas there will be continued substantial demand for coal.


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.