* Supply fear eases despite lack of deal between government
* But market expects a compromise to enable ongoing exports
* Traders also awaiting U.S. Federal Reserve decision at
LONDON, Dec 18 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
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.