Back-end European thermal coal derivatives came under renewed downward pressure in early trading Thursday as plunging Brent crude futures cast a shadow over the market.
CIF ARA year-ahead Cal-17 traded at an intraday low of $40/mt, down 95 cents from Wednesday's close -- before regaining some ground toward midday, when it traded around $40.35/mt.
The downward pressure also appeared to be even more concentrated further along the curve, with Cal-18 dipping below $40/mt to trade at $39.90/mt around 1000 GMT
This marked a historical low for year-ahead trading according to Platts' forward assessments historical records which began in 2007 and a number of industry participants.
"I'm pretty sure year ahead has never gone below $40/mt before," one investment-bank trader observed. "Crude is the largest driver in the fall off at the back of the curve today. The outlook [for coal demand] is quite bleak anyway and anything that adds to that just makes matters worse really," the source added.
Brent crude oil shed 6% of its value in overnight trading to reach lows not hit in more than a decade. At its lowest point, front-month Brent futures it traded only marginally above $32/b.
This, among other bearish factors, triggered an apparent sell off in the CIF ARA year-ahead Cal-17 market, where trading was most concentrated, with coal producers thought to be hedging their exposure.
"The producers are still making money, even at these levels," the investment-bank trader said.
By contrast, the front of the curve appeared to be supported, trading higher over the morning session due to more balanced demand and supply fundamentals. This looked to be widening the existing backwardated structure in the market.
Conversely, front-end CIF ARA prices remained supported, with the front-quarter Q2 2016 contract trading at $44.35/mt just before midday, up 25 cents on its overnight level.
