Thermal Coal Market Tighter Than Expected

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By Rudi Filapek-Vandyck

Stronger than expected demand from Asia has increased the tightness in the thermal coal market more than experts and market watchers thought possible only a few months ago.

Last week, metals experts at National Australia Bank raised their price forecast to a roll-over of last year’s US$52.50 per tonne for the upcoming new Japanese fiscal year. This in itself was a significant upgrade from the previously penciled in forecast of US$46.00 per tonne.

Spot prices in Asia have now again surged to beyond US$55/t with market watchers pointing out the fact that Chinese imports have increased in recent months has had a significant impact on the seaborne market.

Experts at Smith Barney Citigroup report today they “understand” Xstrata is close to setting a new thermal coal contract with Japanese utility Chubu Electric and the proposed new contract price is US$55-56/t.

Rio Tinto (RIO) on the other hand is believed to have offered its customers a price of US$58/t.

Contrary to National Australia Bank, Citigroup analysts already had penciled in a thermal coal price of US$52.50 for the new year.

All in all, or so it would seem, coal producers may still surprise with their price settlements over the next few weeks.

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