Asia Coal-Australia thermal coal prices flat in week

Fri Apr 15, 2011 3:53pm IST

* Japan utilities push for coal contract renegotiation

* Chinese demand for coal begins to pick up

By Rebekah Kebede

PERTH, April 15 (Reuters) - Australia's thermal coal prices, a benchmark for Asia, were unchanged during the past week as global miner Xstrata headed back up to Japan to renegotiate annual thermal coal contract prices.

Australia's thermal coal on the globalCOAL Newcastle index for the week to date was $123.25 per tonne on Thursday, unchanged from a week earlier.

Xstrata and Chugoku Electric had settled the annual thermal coal contract for the Japanese fiscal year starting April 1, but some Japanese buyers wanted to renegotiate the contract price, trade sources said. [ID:nL3E7EV499]

The contract was settled at $129.85, which some Japanese buyers thought was too high. Typically, Japanese utilities choose a representative company to negotiate the price for the industry and subsequently agree as an industry to that price.

"The general feeling is that they will all fall in line," one Singapore-based market source said.

But others said some utilities were convinced they could renegotiate a better price with Xstrata.

"They are not going down without a fight," one Sydney-based trader said, adding that this was in part due to deals done since Chugoku's settlement with Xstrata.

Some Newcastle coal was offered into Thailand this week well below the globalCOAL index level, the trader said.

In addition, Newcastle coal was offered into Europe for May delivery at $130 per tonne, with discounted freight of about $14 per tonne, in a sign that sellers may be motivated.

Meanwhile, physical demand in Europe remained weak, with utilities having stockpiles for their summer needs. [ID:nLDE73D220]

In China, domestic thermal coal prices rose to a three-month high of 790 yuan ($120.92) per tonne this week, while port stocks fell for a sixth-straight session as power plants boost inventories ahead of summer. [ID:nL3E7FE0BP]

This is buoying traders' hopes that the appetite for imports will rebound significantly and Chinese appetite for Indonesian coal did increase with several deals done for 3,800 kcal/kg NAR coal, with prices in the mid-$80 range.

WEEK AHEAD

Traders will continue to watch for signs of Asian demand for coal, particularly from Japan and China. One sign of weaker demand in Asia is the reversal of a historical trend-- stronger demand in Asia has kept Newcastle prices at a premium over South African prices, but South African coal began to trade at a premium to Newcastle prices this week, at least partly due to Japan curbing or delaying imports.[ID:nLDE73C1Y6]

ADDITIONAL REUTERS COAL COVERAGE:

RECURRING MARKET REPORTS

European physical market............

European swaps market...............

Australian spot prices..............

North America coal market...........

STOCKS AND IMPORT/EXPORT DATA

Australia Newcastle stocks..........

S. Africa's Richards Bay stocks.....

TRADES AND TENDERS

Spot trades...

Coal tenders...

COAL PRICES

McCloskeys wkly physical spot/freight prices...<0#MCC-CASH>

API4 coal paper prices, McCloskeys............<0#MCC-C-API4>

API2 coal paper prices, McCloskeys............<0#MCC-C-API2> (Reporting by Rebekah Kebede; Editing by Clarence Fernandez)

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