January 17, 2012 / 6:10 PM / 7 years ago

Euro Coal-S.Africa prices rise $3/T

* Feb S.African prices boosted by tight supply

* Weak power, gas erodes DES ARA values

LONDON, Jan 17 (Reuters) - Prompt South African coal prices rallied by around $3 a tonne on Tuesday as players covered short positions, but this strength was unlikely to last unless China resumes heavy buying in February, traders and utilities said.

Chinese importers have been out of the market for the past few weeks and are not expected to return until after the New Year holidays, but a few have been quietly re-selling cargoes since last week.

European DES ARA prices, by contrast, were little changed with few bids or offers seen.

Coal prices have been supported to a large degree by strong oil prices, which have prevented what could have been a much steeper slide in coal values since December.

Oil’s resilience, due to supply concerns for the most part, has masked the effect of poor coal fundamentals. Oil edged higher on Tuesday to $111.50 a barrel, bolstered by a weaker dollar.

“ARA is a little softer, but there’s a bit of a temporary squeeze on February South African cargoes,” one European trader said.

The weak economic environment in Europe, slower growth in Asia and the warm European winter have combined to cut coal demand, they said.

UK power and gas prices fell on Tuesday because of warmer weather forecasts and greater gas supply, moves which helped trim DES ARA coal prices.

European power prices especially in Germany, were set for further falls due to poor power demand.

PRICES

A February loading South African cargo was bid at $103.50, up $3.50 from Monday.

A March loading South African cargo was bid at $103.15 and offered at $103.75, also up around $3.00.

A February loading DES ARA cargo was bid at $101.75 and offered at $102, down 75 cents on the offer.

A March DES ARA cargo was bid at $102.85 and offered at $104.50. (Reporting by Jacqueline Cowhig, editing by Jane Baird)

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