EURO COAL-Prices dip as Colombia supply disruption fear eases

Wed Dec 18, 2013 10:56am EST

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* Supply fear eases despite lack of deal between government and Drummond

* But market expects a compromise to enable ongoing exports

* Traders also awaiting U.S. Federal Reserve decision at 1900 GMT

LONDON, Dec 18 (Reuters) - Physical coal prices dropped slightly on Wednesday as traders expected a compromise to allow a major Colombian exporter to continue shipments despite the late implementation of a new law.

The price of coal for delivery in January into Europe's main terminals at Amsterdam, Rotterdam and Antwerp (ARA) saw a bid/offer spread of $85.75/$87.00, compared with a settlement price on Tuesday of $86.25 a tonne on electronic brokerage GlobalCOAL.

January South African cargoes from its Richards Bay export terminal were trading 35 cents lower at $86 a tonne.

European coal prices rose to almost $90 a tonne earlier in December as traders feared export disruptions in Colombia, but prices have since eased.

Colombia's government has still not found a solution that would enable the country's No. 2 coal miner Drummond to continue exports after Jan. 1 when a new law takes effect requiring changes to loading methods it is not ready for.

"Although there's still no definitive news on Drummond from Colombia, we expect that some deal will be found as it's in everybody's interest to keep Colombian exports running in early 2014," one coal trader said.

Drummond is behind with the construction of a conveyor belt ship loading system that will be mandatory from January when more-polluting loading by crane is banned.

The Colombian government has suggested that Drummond could seek to pay for loading capacity from a rival coal exporter but traders doubt whether smaller competitors would be willing to offer the use of their infrastructure to Drummond.

Traders have speculated the issue could be resolved by some interim law making it legal for Drummond to continue loading by crane until its conveyor equipment is ready, or that the company continue crane loading but pay a fine.

Traders were also awaiting a U.S. Federal Reserve decision at 1900 GMT on whether it will start to reduce its monetary stimulus this month.

Swings in exchange rates impact coal markets as many European utilities sell electricity in local currencies, such as the euro or Britain's sterling, while they buy coal in dollar.

Many expect the Fed to continue its quantitative easing programme at the current pace of $85 billion monthly asset purchases into next year.

But recent economic data has led others to believe it is time to take the training wheels off the world's largest economy and to allow it to progress on its own.

A weaker euro makes coal, which is dollar-denominated, more expensive for European utilities.

"The euro has fallen two days in a row now, which could be weighing on coal prices," a coal trader said.

U.S. natural gas futures were also slightly higher on Wednesday. Gas price increases mean coal gains competitiveness for U.S. power generation, leaving less coal available for exports to Europe.

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