Reuters reported that there is a glimmer of hope for Asian coal miners with the forward curves for various grades of the fuel starting to point to higher prices in the second half of the year.
The price of spot coal at Australia's Newcastle Port, an Asian benchmark, was USD 73.12 a tonne in the week to April 25th, down about 15% so far this year and close to the four and a half year low of USD 72.98 hit in March.
But while spot coal has been weakening for the past few months, the shape of the futures curve has gradually been shifting to contango, where the price for further-out months exceeds that for near-month contracts.
3 months ago the curve was in backwardation, with the front-month at a 3.4% premium to the 6 month.
The shift to contango would normally be taken as a bullish indicator that prices are more likely to increase in coming months than decline.
But it's not just the thinly-traded Newcastle futures that have flipped to contango. The Indonesian sub-bituminous strip, which tracks prices of low-rank coal, has also switched in the past three months.
The front-month contract was at a 0.8% discount to the six month on Thursday, while three months ago the front-month was at a 4.1% premium to the six-month.
The Argus contract, which measures the price of 5,500 kilocalorie coal delivered to south China, is still in mild backwardation on the front-month to six-month spread, although it has shifted to contango from the seventh month onwards.
The front-month was at a premium of 0.5 percent to the 6 month on Thursday, whereas three months ago the premium was 5.2%.
Source – Reuters
(www.coalguru.com)
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