October 3, 2014 / 3:32 PM / 5 years ago

THERMAL COAL-Strengthening dollar drags on prices

* Stronger dollar weighs on commodities including coal

* Polish coal companies suffer from low prices

LONDON, Oct 3 (Reuters) - Thermal coal prices eased on Friday, under pressure from a combination of bearish fundamentals and a weakening euro against the dollar.

The euro hit a two-year low against the dollar on Friday, driven down by encouraging September U.S. employment figures.

Weaker currencies in coal producing countries typically make exports more attractive which is particularly bearish in a world market already under pressure from excess supply.

European API2 2015 coal futures prices traded at $73.50 a tonne on Friday afternoon, down $1.10 since their last close.

“It’s all euro related - the market was flat to slightly weaker until the dollar rallied against the euro,” a coal trader said.

“I think there’s a little bit more downside, especially if the euro weakens further.”

Physical cargoes from South Africa’s Richards Bay terminal for delivery in November were up 20 cents to $65.85 a tonne. European coal cargoes for delivery in October to Amsterdam, Rotterdam and Antwerp (ARA) were $1.05 lower at $70.75 a tonne on 50,000 tonnes traded.

The medium- to long-term outlook remains negative for coal prices due to ample supply and slower than expected demand.

“It seems the market is structurally oversupplied and generally global demand is fairly weak,” Trevor Sikorski, analyst at Energy Aspects said.

“A lot of additional investment in capacity was done when China was expected to expand its needs and that hasn’t happened this year ... Chinese demand is slowing.”

“The only way coal can get into southern China is to be aggressively priced against Chinese coal.”

European coal producers are suffering from lower world prices with Poland’s state-run Kompania Weglowa, Europe’s largest coal miner, planning to issue bonds and sell some of its mines to bring the company back from the brink of insolvency as it faces a second year of losses.

Earlier this week Poland’s JSW, the EU’s largest coking coal miner, said it might have to sell some non-core assets if unions block its efforts to cut costs in response to low global coal prices. (Reporting by Sarah McFarlane; Editing by David Evans)

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