LONDON, Sept 3 (Reuters) – Physical coal prices in Europe
were steady to slightly higher on Monday, along with crude oil
prices, while a report by Bank of America Merrill Lynch
underlined coal’s dominant position over natural gas as a
feedstock for power generation.
“Coal is just hovering around the psychologically important
$100 a tonne level and will continue to do that for the rest of
the year,” one analyst at a small trading house said.
He added that firm trading sentiment on crude oil markets
was helping to support coal prices. Brent futures were steady to
slightly higher as investors focused on the possibility of more
stimulus measures to revive economic growth.
Oil prices often set the direction of gas prices, making it
less competitive against coal when crude rallies.
Gas prices also rose across Europe’s main trading hubs due
to supply shortages in Britain, the region’s benchmark market,
which made gas less profitable to burn and helped increase
demand for coal.
Analysts at Bank of America Merrill Lynch said the amount of
gas used for power generation hit a five-year low in August as
generators switched to coal.
“Power generators are shunning natural gas,” the analysts
said.
“Therefore, most European generators have replaced more
expensive natural gas with cheaper coal as the baseload
feedstock of choice in 2012, continuing a trend of gas-to-coal
switching that started to be evident last year,” they added.
Coal prices were in decline for much of the first half of
the year as weak demand clashed with rising exports from the
United States, where coal-fired electricity generation has
become unprofitable as a result of the shale gas boom.
Continued…
