Asia Coal-Prices rise above $62, buoyed by Japan dealPERTH, March 16 (Reuters) - Prices of power-station coal from Australia, a benchmark for Asia, rose for the first time in a month to hover above $62 a barrel, buoyed by news of a thermal coal deal between Australian miners and Japan's Chubu Electric.
But despite last week's rise, prices remain at 20-month lows amid worries of weak demand and supplies flooding export markets.
Thermal coal prices on the globalCOAL Newcastle weekly index rose 40 cents from a week ago to $62.10 a tonne in the week ended March 14. Prices are little changed from mid-last week.
Mining giant Xstrata's coal unit in Australia and Rio Tinto Coal struck a deal with Japan's Chubu Electric early last week at prices between $70-$72 a tonne, down 44 percent from a year ago but still about $10 higher than the prevailing spot market prices.
'The market will now be eyeing Xstrata's negotiations with other top Japanese utilities, such as J-Power and Tohoku. There's a possibility that Tohoku may push for lower prices,' said Mark Pervan, a senior commodities analyst at the Australia & New
Zealand Bank.
With spot coal prices trading at a backwardation on the globalCOAL and ICE futures exchange, whereby prices are expected to decline to around $58.50 a tonne by June, industry sources said other top Japanese utilities may not follow Chubu's lead.
Industry sources said marketing executives from Xstrata are still in Tokyo this week to negotiate fiscal 2009/10 coal supply contracts with other key customers.
Results of a coal tender awarded last week by South Korean utility Korea South-East Power (KOSEP) also pointed to growing supplies from Australia, where producers divert more low-grade coking coal material to the power generation market as demand from steelmills slump.
Prices awarded for the tender hovered around $61-$62 a tonne, based on coal with a heating value of 6,080 kcal/kg (NAR), down about $2-$3 compared with tender results issued a week ago by other South Korean utilities, trade sources said.
'Producers like Xstrata and Rio need the cash so they will try their hardest to ship as much coal as they can so long as it remains profitable. Given that, export supplies aren't going to fall in the short term,' said a Sydney-based trader.
Spot thermal coal prices have shed nearly 70 percent since striking a record high of $201 a tonne last July, pressured by slumping demand from the industrial sector and increased supplies. source: reuters 16 March 2009
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