Japanese Thermal Coal Price Near Settlement
As global thermal coal demand remains tepid, leading coal industry producer, Xstrata Coal and Japanese Power Utilities, are thought to be close to settling a new term contract at a price just below US$100/t.
An Australian trader said although he hadn’t heard how the negotiations were progressing, he believed Xstrata was seeking a price in the high US$90s/t FOB while the JPUs were holding out for a price in the low $90s. Although these talks are for small volumes, the outcome will provide an indication for the settlement price for the Japanese Fiscal Year (JFY) 2013 long term thermal coal contracts beginning April 1 when most of the volume required by the JPUs is contracted.
The JFY April 2012 - March 2013 contract price was settled at $115.25/t FOB, about a $10 premium to the thermal coal spot price at that time. The Australian government’s Bureau of Resources and Energy Economics (BREE) in its September resources and energy quarterly report is forecasting the JFY 2013 price will be settled at about $100/t based on current thermal coal spot prices of about $90/t.
As with Energy Publishing’s other global thermal coal indices, the NEX index for Newcastle coal began to drift lower this week, just edging below $90/t for the first time in six weeks. The hoped-for support from increased Chinese buying that usually occurs at this time of the year with utilities beginning to build winter stocks has so far failed to materialise. China’s ports and power plants remain well stocked even though domestic coal production has been cut back.
A China-based trader said there had been increased interest from Chinese buyers for imported coal since last week but it has been nowhere near as strong as in previous years and the contract terms were becoming increasingly onerous.
“Chinese traders are continuing to demand crazy terms in contracts which makes it very difficult to conclude deals even though in several cases we’ve settled on price,” he said.
It has become standard practice for the Chinese counterparties to demand the international sellers to pay any demurrage on cargoes even though contracts are conducted on a CFR basis, the trader said. The counterparties insist on this requirement because they say they are unable to recoup this cost from the domestic power companies.
“Because the utilities aren’t desperate for coal, they are abusing the power they have over the traders,” he said.
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