October 07, 2008

Thermal coal prices surge ahead of Japanese negotiations

Reuters reported that Benchmark Australian spot thermal coal traded above USD 67 a tonne recently amid final negotiations between Japanese utilities and Australian producers for 2008 contracts.

Major Australian producer said "Spot prices are taking cue from negotiations between Japanese utilities and Australian producers, which are now being discussed at between USD 69 to USD 71 a tonne."

Other industry sources said market sentiment had changed significantly in the past week, following a bull run in the coal swaps market which saw delivered coal prices into the Amsterdam-Rotterdam-Antwerp breaching USD 100 a tonne.

Coal traders said prices were also prodded higher on expectations of a supply squeeze worsening in the fourth quarter following news of Australia's Newcastle port cutting fourth quarter export allocations by at least 1.7 million tonnes.

The move by Korean utilities to already secure 2008 term contracts in anticipation of a worsening supply shortage next year has also boosted spot prices. Australian producers, including Rio Tinto and Peabody this month concluded negotiations with Korean utilities such as Korea East West Power Co and Korea Southern Power Co for 2008 term contracts at about USD 66 a tonne.