Wednesday, June 26, 2013

Japan's Tepco settles Jul 2013-Jun 2014 coal contract at $89.95/mt FOB Newcastle

Japan's Tokyo Electric Power Company has settled its July 2013-June 2014 thermal coal contract with Australian suppliers at $89.95/mt FOB Newcastle basis 6,322 kcal/kg GAR, a market source familiar with the matter said Wednesday.

The fixed-price deal at $89.95/mt FOB Newcastle for thermal coal with a calorific value of 6,322 kcal/kg GAR, can be compared with $95/mt FOB that Tepco agreed to pay for the April 2013-March 2014 contract for Australian thermal coal earlier this year.

Some market participants had expected the contract to be settled on a floating price basis as the Japanese utility switched to a floating price -- an unknown premium to the globalCOAL Newcastle -- for deliveries in January 2013.

Market participants said the July 2013-June 2014 contract price appeared favorable to Australian thermal coal producers who are currently struggling with spot prices falling to the $70s/mt FOB for Australian 6,300 kcal/kg GAR thermal coal.

"The producers appear to have done well," said one trader in reaction to Tepco's latest contract.

Cargoes of Australian thermal coal with a calorific value of 6,000 kcal/kg NAR, (equivalent to 6,300 kcal/kg GAR) were bid Wednesday in Asian trade at $79.50/mt FOB for loading from Newcastle port in July, while buying interest in September- and October-loading cargoes hovered around $76.50/mt and $76/mt, respectively, he said.

The trader said the Newcastle thermal coal market was beset by chronic oversupply and cited a recent tender from Japanese Joban Joint Power Company seeking coal that was oversubscribed by 20 times. The company received offers for 10 million mt of thermal coal to fill a gap of 600,000 mt in its supply schedule. "There is a glut of coal in the market," he added.

Another trader too described the price settled on by Tepco as good for Australian suppliers as forward derivative prices for Newcastle thermal coal were currently trading at $81.50/mt FOB for the year starting July 1.

Prices at the Newcastle trading hub for thermal coal plunged earlier this week when a 25,000 mt parcel of August-loading Newcastle thermal coal with a calorific value of 6,000 kcal/kg NAR traded at $77.50/mt FOB on Tuesday, and a September-loading parcel of the same size traded at $79.50/mt on Monday on the globalCOAL platform.