* July ARA trades at $88/T
* May ARA bid at $83
LONDON, May 2 (Reuters) - European coal prices slid by $3 on
Wednesday to $88 a tonne, having touched two-year lows the day
before, and the drop in prices drew out some buying.
Traders and some utilities bought July cargoes at $88.00 a
tonne DES ARA, down from $91 on Tuesday.
The discount of prompt to forward prices makes it viable to
store the coal for months or re-sell an unwanted second-half
cargo and replace it with a cheaper fresh purchase.
Three July DES ARA cargoes traded on Wednesday at $88.00,
two of which were bought by a trader at a utility.
"If you look at the fixed prices for these (July) trades
compared with coal paper (swaps), they were done at $3.50 below
swaps, and for any utility that's got to be attractive," one
European trader said.
European utilities seek to buy fuel at a discount to the
swaps they use to hedge their price risk and to achieve the
biggest discounts to swaps possible.
"It could go lower, but a lot depends on the weather and how
much renewables come into play, and nobody can predict that
accurately now," a utility source said.
On Tuesday, prompt European delivered coal prices fell to
their lowest since May 2010 with a trade at $86.25 a tonne
delivered in the Amsterdam-Rotterdam-Antwerp (ARA) area on the
globalCOAL trading platform, traders said.
That price was at a discount of $3.25 to equivalent API2 coal
swaps benchmarks, signalling the start of a long-awaited bout of
selling.
Normally the physical and the swaps markets are more closely
aligned and a discount of physical coal to swaps is usually seen
as an indicator of market weakness.
South African FOB Richards Bay prices were steady at around
$97 a tonne, little changed from earlier in the week.
There has been enough Indian spot buying to keep prices
stable because supply out of Richards Bay remains tight,
producers and traders said.
TRADES
Three July DES ARA cargoes traded at $88, down $3.00 from
the day before.
PRICES
A May DES ARA cargo was bid at $83.00 and offered at $86.50,
down $3.00 on the bid from the previous day's levels.
A June ARA cargo was bid at $84 and offered at $86.75, also
down over $2.00.
(Reporting by Jacqueline Cowhig, editing by Jane Baird)
© Thomson Reuters 2012 All rights reserved
