Record coal prices hammer power generators
Saturday, 29 September 2007
Jackie Cowhig
Record high coal prices and tight supply are piling the pressure on electricity generators already hit by soaring oil markets and high gas prices, industry players say.
Coal fuels about 40 pct of global power generation. Physical coal prices for delivery into Europe have risen by over 50 percent this year.
High freight rates are tightening the screws on prices and utilities and cement producers, also big coal users, may be forced to scale down operations.
"The market is having to adapt to coal prices, to freights, which we've never seen before," a trader said.
"I do believe that before the end of the year it's possible that some generators in Asia will have to look at turning off their plants because they won't have enough coal," said a coal producer.
Physical coal prices on Thursday surged to a record $102.00 a tonne delivered into Europe, from $65.00 in the first quarter, because rampant demand in Asia has sucked in millions of tonnes originally destined for the Atlantic market.
Power generators, Europe's biggest coal consumers by far, buy most of their coal on rolling long-term contracts from producers but usually purchase a small proportion from the spot market.
Coal-fired generation is used most heavily during the winter months when it is usually the lowest-cost fuel.
Some European regions can switch from coal to hydro, wind or gas-fired, notably Scandinavia, Germany and Iberia, but most European utilities rely on at least some coal-fired generation.
Germany's E.ON AG (EONG.DE: Quote, Profile, Research), Italy's Enel (ENEI.MI: Quote, Profile, Research) and Spain's Endesa (ELE.MC: Quote, Profile, Research) are among the utilities currently seeking coal for Q4 and Q1, market sources said.
One European utility recently paid close to $115.00 a tonne CIF for a South African cargo which it bought to replace delayed shipments of other origins.
European cement companies said they also recently bought at prices far higher than those indicated on the globalCOAL trading platform or by published weekly coal indices.
"So many utilities and cement companies are looking," a trader said. "They will pay but they are desperate that nobody finds out."
A large European industrial consumer of coal said his company had struggled recently to find enough coal of any acceptable origin and had no choice but to pay the price asked by the supplier.
"In Europe anyway, I think you will be able to find enough coal, but it won't be easy and you'll have to pay up," a further trader said
Some European regions can switch from coal to hydro, wind or gas-fired, notably Scandinavia, Germany and Iberia, but most European utilities rely on at least some coal-fired generation.
Germany's E.ON AG (EONG.DE: Quote, Profile, Research), Italy's Enel (ENEI.MI: Quote, Profile, Research) and Spain's Endesa (ELE.MC: Quote, Profile, Research) are among the utilities currently seeking coal for Q4 and Q1, market sources said.
One European utility recently paid close to $115.00 a tonne CIF for a South African cargo which it bought to replace delayed shipments of other origins.
European cement companies said they also recently bought at prices far higher than those indicated on the globalCOAL trading platform or by published weekly coal indices.
"So many utilities and cement companies are looking," a trader said. "They will pay but they are desperate that nobody finds out."
A large European industrial consumer of coal said his company had struggled recently to find enough coal of any acceptable origin and had no choice but to pay the price asked by the supplier.
"In Europe anyway, I think you will be able to find enough coal, but it won't be easy and you'll have to pay up," a further trader said.
—Reuters
Record high coal prices and tight supply are piling the pressure on electricity generators already hit by soaring oil markets and high gas prices, industry players say.
Coal fuels about 40 pct of global power generation. Physical coal prices for delivery into Europe have risen by over 50 percent this year.
High freight rates are tightening the screws on prices and utilities and cement producers, also big coal users, may be forced to scale down operations.
"The market is having to adapt to coal prices, to freights, which we've never seen before," a trader said.
"I do believe that before the end of the year it's possible that some generators in Asia will have to look at turning off their plants because they won't have enough coal," said a coal producer.
Physical coal prices on Thursday surged to a record $102.00 a tonne delivered into Europe, from $65.00 in the first quarter, because rampant demand in Asia has sucked in millions of tonnes originally destined for the Atlantic market.
Power generators, Europe's biggest coal consumers by far, buy most of their coal on rolling long-term contracts from producers but usually purchase a small proportion from the spot market.
Coal-fired generation is used most heavily during the winter months when it is usually the lowest-cost fuel.
Some European regions can switch from coal to hydro, wind or gas-fired, notably Scandinavia, Germany and Iberia, but most European utilities rely on at least some coal-fired generation.
Germany's E.ON AG (EONG.DE: Quote, Profile, Research), Italy's Enel (ENEI.MI: Quote, Profile, Research) and Spain's Endesa (ELE.MC: Quote, Profile, Research) are among the utilities currently seeking coal for Q4 and Q1, market sources said.
One European utility recently paid close to $115.00 a tonne CIF for a South African cargo which it bought to replace delayed shipments of other origins.
European cement companies said they also recently bought at prices far higher than those indicated on the globalCOAL trading platform or by published weekly coal indices.
"So many utilities and cement companies are looking," a trader said. "They will pay but they are desperate that nobody finds out."
A large European industrial consumer of coal said his company had struggled recently to find enough coal of any acceptable origin and had no choice but to pay the price asked by the supplier.
"In Europe anyway, I think you will be able to find enough coal, but it won't be easy and you'll have to pay up," a further trader said
Some European regions can switch from coal to hydro, wind or gas-fired, notably Scandinavia, Germany and Iberia, but most European utilities rely on at least some coal-fired generation.
Germany's E.ON AG (EONG.DE: Quote, Profile, Research), Italy's Enel (ENEI.MI: Quote, Profile, Research) and Spain's Endesa (ELE.MC: Quote, Profile, Research) are among the utilities currently seeking coal for Q4 and Q1, market sources said.
One European utility recently paid close to $115.00 a tonne CIF for a South African cargo which it bought to replace delayed shipments of other origins.
European cement companies said they also recently bought at prices far higher than those indicated on the globalCOAL trading platform or by published weekly coal indices.
"So many utilities and cement companies are looking," a trader said. "They will pay but they are desperate that nobody finds out."
A large European industrial consumer of coal said his company had struggled recently to find enough coal of any acceptable origin and had no choice but to pay the price asked by the supplier.
"In Europe anyway, I think you will be able to find enough coal, but it won't be easy and you'll have to pay up," a further trader said.
—Reuters