Glencore, Tohoku settle April term thermal coal contracts at $68.75/mt FOB: sources

Singapore — Japanese power utility Tohoku and Australian coal producer Glencore have agreed on a price of $68.75/mt FOB for 6,322 kcal/kg GAR thermal coal shipments for delivery from this April to next March, market sources close to the matter said Wednesday.

The price was lower than their expectations of $70/mt, the sources said.

The price agreement "has shown some signs of weakness on Glencore's side as the price was settled with a smaller premium to the globalCOAL Index as compared to previous years," a trader said.

The current globalCOAL Index was said to be $69/mt FOB for 6,000 kcal/kg NAR Australian coal.

"Given that the market price has been moving up amid supply uncertainties due to coronavirus pandemic, this is a good price for the buyer and a fair price for the seller," a Japan-based trader said.

With South African miners said to be producing at a slower rate due to the coronavirus pandemic, Australian coal could gain traction in the high-CV market in Asia, another trader said.

Other than the benchmark price, Glencore and Tohoku were said to be discussing volumes under the April contract, sources said.

"Glencore wants to sell more volume under April term contracts while Tohoku wants to limit volumes," a trader said.

Glencore had reportedly offered cargoes in the early $70s/mt FOB while Tohoku has persisted with bids closer to $65-$66/mt FOB, sources said last month.

Last year, Tohoku and Glencore finalized the April benchmark at $94.75/mt FOB and Japanese steel producer Nippon Steel and a few Japanese general industries reportedly settled the October benchmark with Glencore to at $72.75/mt FOB Newcastle basis 6,322 kcal/kg GAR.

Tohoku is one of Japan's largest power utilities, consuming roughly about 8 million mt coal in 2018, according to the company's 2019 data book.

Glencore is Australia's largest coal producer with Australian thermal coal production at 72.8 million mt in 2019, of which 64.2 million mt was exported, according to the company's 2019 annual report.

Glencore declined to comment. Tohoku was not available for comments.