Diversion of Chinese coal to domestic power generation is a major factor driving thermal demand at present. Spot prices being paid for thermal coal out of the Newcastle port are rising rapidly and hit US$40 per tonne recently, a big gap from the US$26.75 a tonne for the Japanese 2003-04 fiscal year ending this March 31.
Major thermal producer Xstrata is expected to settle in the next few weeks, according to Reuters reports, though other reports suggest negotiations may drag on till the end of March.
Suppliers of hard coking coal into Japan have already secured strong price rises of up to 25%, to about $US56 a tonne. Subsequent settlements into other hard coking coal markets such as Brazil and India have reportedly gone higher than US$56/t. Semi-soft coal has settled at about $US40 a tonne, up from $US30 previously.
Colin Bloomfield, president of BHP Billiton’s Illawarra Coal said the steel market, demand from China and general low levels of production worldwide were driving coking coal demand.
The start of production from the Dendrobium mine west of Wollongong in the middle of next year is expected to allow BHPB to capitalise on any price increases.
