Spot European-delivered thermal coal traded a hefty $4 higher in early trading Wednesday, as an intervention by Colombian President Juan Manuel Santos cast fresh doubts on whether US producer Drummond will manage to evade an export ban in the first quarter.
Drummond's failure to comply with a January 1 deadline to complete the conversion of its terminal near Santa Marta on the Caribbean coast to a more environmentally friendly "direct loading" facility -- whereby coal is transferred onto vessels directly by conveyor belt as opposed to floating cranes -- has dominated front-end CIF ARA pricing for the last few weeks.
In an online Twitter posting, Santos asked environment minister Luz Sarmiento to "travel to Santa Marta, evaluate the situation on direct loading and do not hesitate to take a decision to protect the environment."
On the globalCOAL electronic platform Wednesday, a February DES Rotterdam-delivery 50,000 mt of Colombian coal traded at $85/mt, $4 above the contract's closing level Tuesday.
Earlier in the session, a same-sized March Rotterdam multi-origin shipment went through on-screen at $80.25/mt with exchange of futures for physical terms attached, up $1 from Tuesday.
Prompt CIF ARA prices had lost nearly $4 since the start of the year due to market consensus that Drummond had negotiated a deal with the Colombian government to pay daily fines to keep on exporting until the new technology is ready in late March.
The president's message is the latest of several developments out of Colombia that have increased fears that Drummond's 2.5 million mt/month export contribution to the Atlantic market could be cut and consequently brought volatility to the CIF ARA spot market.
A Switzerland-based trading source said that the possible effects of the president's message were "difficult to interpret" and stressed that it did not mean that a halt to Drummond loadings was imminent.
"However, what it does do is pose more questions about first-quarter supply and gives the longs in the market some ammunition to drive prices a bit higher," he said.
