PERTH: Australia's thermal coal price benchmark rose slightly to $107 a tonne this week, as protracted annual price negotiations between miner Xstrata and Japanese utilities continued and some Chinese demand returned to the market.
Australia's Newcastle index for the week to date closed at $107.01 per tonne on Thursday, up from $104.81 a week earlier.
Negotiations between Japanese utilities and Xstrata, the world's largest thermal coal exporter, for the annual coal contract beginning April 1 continued this week, with Japanese utilities holding out for around $110 per tonne or below and Xstrata said to be holding firm at $120 per tonne.
"It's taken a lot longer than we would have hoped for," one Brisbane-based market source said.
Traders said the contract is expected to settle in the $115 to $117 per tonne range, but one source described that as "wishful thinking" on the part of the producers.
The annual contract is typically settled just about the globalCOAL benchmark price and the $115 to $117 per tonne price would be a significant jump from the index price of around $107.
Although neither party has been willing to compromise on price so far, deliveries are expected to continue on a provisional basis.
"Even if the new price is not settled, I don't think it will impact deliveries," a Sydney-based market source said.
CHINA DEMAND PICKS UP
Chinese coal buyers were more active in the market this week as Chinese steam coal prices on the benchmark Bohai-Bay Rim index rose again slightly to 777 yuan ($120) a tonne, up 0.26 percent from a week ago, trade sources said.
South African coal a few dollars cheaper than Australian cargoes, were attracting Chinese buying interest, as were Indonesian cargoes.
Bids for Indonesian coal were around $75 per tonne for 4,700 kcal per kg NAR coal, a Sydney-based market source said.
US producers from the Powder River Basin have also been selling coal into China with cheap freights making the deals attractive, but some in the market predicted the trade would be temporary.
"As soon as there are prices in Europe, that will stop," the Sydney-based source said.