August 12, 2015 / 4:18 AM / 4 years ago

THERMAL COAL-Sliding Chinese yuan sends coal to near decade lows

* API2 coal futures drop to lowest level since Nov. 2005

* China’s yuan hits 4-year low

* Lower yuan erodes purchasing power for China’s coal importers

* Chinese imports already hit by slowing GDP, pollution measures

By Henning Gloystein

SINGAPORE, Aug 12 (Reuters) - Coal futures fell to their lowest level in almost a decade this week as China’s devaluation of its currency triggered economic concerns over the economy of the world’s biggest coal consumer.

Benchmark European API2 2016 coal futures last settled at $54.35 per tonne, their lowest level since November 2005 and down almost two-thirds since their last peak in 2011, and benchmark Chinese coal futures, launched in 2013, were also near record lows, last settling at $51.10 a tonne.

The price falls came as China’s yuan hit four-year lows, slipping further a day after authorities devalued the yuan in a move that raised fears of a global currency war.

Analysts said they expected China’s government to intervene further this year in support of its economy.

“Going forward, we believe the government will continue to ease policy to stabilize sluggish aggregate demand growth,” Morgan Stanley said on Wednesday, adding it expected another interest rate cut towards the end of the third quarter 2015.

China is the world’s biggest importer of thermal coal, but its demand for overseas shipments has already been waning as its economy grows at its slowest pace in decades and the government tries to reign in on rampant pollution, to which coal contributes heavily.

The country’s coal imports over the first half of the year were down 37.5 percent over the same period last year to 99.9 million tonnes, although there has been a slight pick-up since July.

With China’s yuan now also falling, its importers are seeing their purchasing power of dollar-denominated products like coal or oil eroded, potentially hitting demand.

The physical coal products underlying API derivatives were also weak, with prompt cargoes from South Africa’s Richards Bay export terminal last settling at $55.20 a tonne, close to 2015 lows.

Cargoes from Australia’s Newcastle terminal were 1.7 percent down from their August high at $61.20 a tonne, and shipments into Europe’s main terminals at Amsterdam, Rotterdam or Antwerp (ARA) were at $56.885 a tonne, down 1.65 percent from their monthly high.

Editing by Michael Perry

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