RTRS: Euro coal futures trade sideways ahead of Christmas
* Support from Asian demand
* UK coal use rises, gas drops
LONDON, Dec 23 (Reuters) - European coal futures moved sideways on Thursday morning, with little trading activity ahead of the Christmas weekend.
The API2 2011 contract was around $117.50 per tonne (mt), similar to Wednesday's levels, and the market again shied away from rising to $120 per metric tonne for the first time since the peak of the financial crisis in Nov. 2008.
Since the beginning of the current upward trend last September, API2 2011 coal contracts have gained over 22 percent.
Traders said that the coal market remained strong mainly because of strong demand across Asia.
But coal usage in Europe is also on the up, as gas power generation was pushed out of the money this year through the cold start to the winter and, before that, through North Sea gas and Qatari liquefied natural gas (LNG) supply squeezes.
The supply from coal in the third quarter of 2010 rose by 17.5 percent, while gas fell by 6.9 percent relative to the same period of 2009, the department of energy and climate change (DECC) said in a report on Thursday. [ID:nLDE6BM0N7]
"I think the market will push the price over $120 a tonne early in January, and then everyone will have to readjust their horizon upward," one coal trader said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graph of year-ahead API2 2011 prices, click here: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
COAL SQUEEZES POWER MARGINS
The firm coal market continued to squeeze revenues for coal power generators in Europe.
European forward power prices have remained fairly flat despite the cold, squeezing revenue margins of European electricity generators that rely on coal production.
German 2011 base coal power margins -- known as the clean dark spread -- set a new record low at the beginning of the week by dropping below one euro per megawatt-hour, although by Thursday they had regained to over 1.50 euros.
With the equivalent gas spread around zero, fossil production margins for European utilities remain at, or close to, historic lows. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graph of German coal and gas power margins, click here: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Henning Gloystein; Editing by William Hardy)
