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US coal finding its way into Europe, Mediterranean markets

Shrinking Indian demand is forcing US coal into Europe and the Mediterranean as South African and Colombian coal seeks a home in more lucrative Asian markets, trade sources said.

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With delivered CIF ARA 6,000 kcal/kg prices into northern Europe surpassing $80/mt this week, US high sulfur coal from the Illinois Basin is still pricing into European markets. But competition from petcoke could thwart coal's ambition in more price-sensitive regions, trade sources said.

"India is not as big a buyer because of the monsoon season -- if you want to move those tons, you need to find a home for them. That is usually Europe," a market source said.

With US Gulf Coast freights to Europe softening to around $12/mt, the sulfur discount has increased to roughly $8-$9/mt as more US coal seeks a home in Europe, the source said.



A US coal marketer is quoting Illinois Basin coal for May loading at $61/mt FOB New Orleans, although the real market is closer to $58-$59/mt, a European trade source said.

The margins are tight, but still work for lower cost miners, the source said.

South African and Colombian coals are lower cost than US production, but US producers willing to take a lower prices can compete, the source said, particularly as more South African and Colombian coals are shipping into Asia.

A distressed Northern Appalachian cargo also was reportedly sold at $99/mt CFR Krishnapatnam. That price would not work for most miners at FOB Baltimore, where prices were seen in the low $80s/mt this week, with deals reportedly heard at $82.50/mt for 6,900 kcal/kg material for May loading.

High sulfur (3%) Northern Appalachian coal, however, is pricing into Egypt and blending well with Russian coal, the first trade source said.

The high CV (6,900 kcal/kg) coal, which has a freight between $18-$20/mt, has a delivered price of roughly $98-$100/mt, the source said.

That coal is blending with 6,000 kcal/kg Russian coal with max 0.65% sulfur delivered at $93-$94/mt from the Black Sea, the source said.

South African coals also are factoring into Egypt, but discharge issues through the Suez Canal have limited purchases from South Africa, the source said.

"South African coal is very expensive on a CV-basis," the source said. "That's why you will see a lot of US coal coming to Egypt."

COMPETITION FROM PETCOKE

A US-based source cautioned that an increased flow of US coal could be at risk if that coal is competing with petcoke. While a possible ban on petcoke imports in India could mark a fundamentally bullish shift for US coal, markets where purchasing decisions are made on a $/MMBtu or $/kcal basis will still be risky for coal, said the source.

"Petcoke can win at any price," the source said Friday. "Petcoke has to move, and they can lower the price until coal becomes unsaleable."

Platts assessed high sulfur (6.5%) petcoke FOB US Gulf Coast (7,500 kcal/kg NAR) this week at $78/mt, or $0.0104/kcal. In comparison, Illinois Basin coal FOB Baltimore (6,111 kcal/kg NAR) was assessed this week at $60/mt, or $0.0098/kcal.

--Jeffrey McDonald, jeffrey.mcdonald@spglobal.com

--Andrew Moore, andrew.moore@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com