LONDON, April 15 (Reuters) – Thermal coal futures edged higher on Wednesday as traders expected the strengthening Russian currency to make Russian exports less profitable, helping support global prices.
After falling by about 40 percent against the dollar last year during an economic downturn, worsened by Western sanctions over the situation in Ukraine and a fall in oil prices, the rouble has strengthened by almost 40 percent since late January.
“We haven’t seen that filter through to the market yet, we haven’t seen them (Russian exporters) asking for higher prices yet, but we’re keeping an eye on it,” a trader said.
Russia is one of the world’s top five coal exporters and many exporters had benefited from higher margins as the slide in the rouble cut their costs in dollar terms late last year.
European API2 2015 coal futures were up 1 percent at $57.15 a tonne, holding near a nine-year low of $55.25 hit on April 8.
Traders remained bearish on the medium term outlook for coal prices however, as the sharpness of the fall in top consumer China’s imports in the first quarter of 2015 caught some by surprise.
“It definitely doesn’t look good. You can safely say Chinese imports will be down by more than 40 million tonnes this year,” a trader said.
“I don’t know where the demand is going to be made up, sure Korea and India will import a bit more, but I don’t think that will be of the same magnitude of the drop in China.”
Prompt cargoes from Australia’s Newcastle terminal last settled at $56.70 a tonne, having more than halved since prices peaked in 2011, after Japan’s Fukushima nuclear crisis.
Global coal production has not been significantly cut in response to lower prices and traders said this was imperative if the market was to reverse its trend lower.
“I don’t think you’ll see a drop from Australian exports, so we’re really counting on Indonesia to pull back a bit,” said the trader. (Reporting by Sarah McFarlane; Editing by Susan Thomas)