Hard Times Ahead for Global Coal Trade

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The global credit crunch is stifling physical coal trade around the world, slicing volumes and prices, with even large utilities struggling to raise short-term finance to operate normally.

The global credit crunch is stifling physical coal trade around the world, slicing volumes and prices, with even large utilities struggling to raise short-term finance to operate normally.

The VM Group said in its latest Fortis Energy Monthly that European power utilities reported in early October that they had stopped trading coal swaps and physical cargoes with some banks.

Only a handful of coal traders with the larger utilities, such as EDF Trading, RWE and E.ON and established traders such as Glencore and Vitol would withstand the storm, while many smaller trading operations have been finding it hard to do business and now face an uncertain future.

Also boding ill for global coal trade was the European parliament's October decision to effectively ban all new coal-fired power stations being built unless they incorporate carbon capture and storage (CCS) technology.

The vote sparked criticism from heavy coal users such as the United Kingdom, Germany and Poland who said it would cause an energy gap as CCS was not available yet. Negotiations between Brussels and member states were underway and a full parliamentary vote could be held in December.

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