Coal market could be done falling

After a year with steady price falls on the international coal markets, there are now signs that the market is finding some foothold. Prices have increased slightly, but a big rebound should not be on the way.

Monday morning, coal prices in Europe are climbing again. It is the third trading day in a row, that the market is rising, and during the last couple of weeks, the price on a ton of coal for delivery in 2020 has increased by around 5 % to 66 US dollars. There are several indicators that the long-lasting downturn on the market could be about to end.

Earlier this Summer, coal prices in both Europe and Asia dropped to a multi-year low, and there are now signs that buying interest is reemerging on the market. In Asia, demand has increased in both China and India, while we in Europe see higher consumption in Germany as well.

The market has been oversupplied for quite some time now, but there are signs that producers are starting to account to the low prices, which make it less profitable to keep up a high production level. For instance, exports from Colombia are falling and production is slowing down in China as well.

In total, the numbers from the European coal terminals make it clear, that the gap between supply and demand is not as wide as it was earlier this year. Coal stocks at the large Dutch and Belgian coal terminals were at a total of 6.43 million tons last week, and even though this is still 17 % higher than at the same time last year, it is the lowest level since March, according to data from energy news site Montel.

Even though the market appears to have found a foothold now, we do not expect any big price jump. Trade war and fears of a global economic showdown are still bearish factors weighing heavily on the market. We find it more likely that the market will find a stable level with a price just above 60 dollars per ton.