UK clean dark spread edges lower
London, 2 January (Argus) — The UK month-ahead clean dark spread — the profit margin for coal-fired power based on coal, carbon and electricity prices — slipped from a three-year high in early December, but is still high as coal prices remain depressed.
European delivered coal prices averaged just under $90/t in December, down by around 19pc from $111.49/t a year earlier, while Argus assessed average month-ahead natural gas prices at 68.43p/th, up by 20pc on the year.
The UK month-ahead clean dark spread reached £23.72/MWh ($38.65/MWh) on 31 December, down from £26.10/MWh on 5 December — the highest since early 2009. Uncompetitive natural gas prices meant that clean spark spreads — the profit margin for gas-fired power — were at £1.87/MWh on 31 December, up by 10p/MWh on the month.
Profit margins for burning coal fell steadily in mid-December, in line with an increase in the price of European delivered coal. Profit margins fell to £23.81/MWh on 19 December from £25.45/MWh on 12 December. Spot European delivered coal prices rose by around $4.50/t in the same period to $91.49/t. Spot European coal prices received a lift when a logistical dispute in Colombia affected the amount of coal that Fenoco-operated railways could carry as a result of a regional night-time rail restriction.
UK month-ahead clean dark spreads averaged £17.53/MWh in 2012, up by just over 60pc from £10.90/MWh in 2011. Clean spark spreads fell by around 69pc in the same period, down to an average of £1.38/MWh from £4.53/MWh.
Coal prices fell in 2012 as lower international demand and steady supply pressured prices. US coal demand weakened last year as a result of a boom in shale gas production. The use of shale gas instead of coal in the US led to excess coal supply being pushed into the European market. These additional volumes — coupled with lower demand from China and India, which failed to absorb some Colombian or South African tonnage — resulted in oversupply in Europe.
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