FOB Newcastle 5,500 NAR Coal Price Assessment

What is the FOB Newcastle 5,500 NAR coal price assessment?

The Platts FOB Newcastle 5,500 NAR assessment by S&P Global Commodity Insights is a daily 7-45 day forward price assessment for higher-ash thermal coal exported out of the port of Newcastle on Australia's eastern coast and typically shipped to China. The term ‘5,500 NAR' refers to the net calorific value (heating value) of the coal in kilocalories per kilogram.
S&P Global Commodity Insights also publishes the first ever daily ash assessment which is a normalization tool for use within the 17-23% ash range assessed.
The new price and ash differential assessments provide thermal coal producers, power producers, cement manufacturers, coal traders and ship brokers with an independent, transparent source of open-marker spot prices for lower-grade export Australian thermal coal.
The FOB Newcastle 5,500 NAR and ash differential assessments are available in these services.
FOB Newcastle 5,500 NAR is an important assessment, reflecting a shift in spot market liquidity from the industry standard FOB Newcastle 6,300 kcal/kg GAR quality coal bought mainly by Japanese utilities to lower calorific value, higher ash coal preferred by Chinese, Korean and Taiwanese end-users.
As a result, Australian coal producers reconfigured their product offerings to align with market demand, and Newcastle spot cargoes have been trading in volume on a 5,500 kcal/kg NAR basis since mid-2011.
In addition, S&P Global Commodity Insights has determined through extensive market engagement that assessments of Newcastle spot cargoes should reflect a shorter delivery period than the industry standard 90-day window and typical of the changing buying behavior exhibited by China, Korea and also India.

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How we assess FOB Newcastle 5,500 NAR and the ash differential

Our team of experienced coal market reporters interviews a broad pool of active market participants including but not limited to producers, consumers, traders and brokers on a daily basis. S&P Global Commodity Insights places great value on its ability to discover settled physical tonnage deals, which constitute the best indication of the true market value for a given coal.
In the absence of confirmed trades, assessments take into account firm bids and offers that meet our methodology guidelines. Bids and offers must increase or decrease in realistic increments for inclusion in the assessment.
Our FOB Newcastle 5,500 NAR daily assessment reflects the tradable, repeatable spot market price of this increasingly important grade of coal at 5.30.00 Singapore time precisely.
We publish bids, offers, expressions of interest to trade, and confirmed trades during our Market on Close process every day. The information is summarized in daily market comments in our newsletter Coal Trader International.
Each day in Coal Trader International the ash differential assessment is published directly beneath the FOB Newcastle 5,500 NAR assessment detailing the exact value of each 1% of ash content within the 17-23% band.

Evolution of the FOB Newcastle 5,500 NAR market – a brief history

We began assessing the FOB Newcastle 5,500 kcal/kg NAR thermal coal market on January 3, 2012, while the ash normalization tool was launched to the market in August 2012.
The physical coal market in Asia has altered radically in the last two years. Japan has also surprised the market by moving away from one-price annually agreed contracts, showing flexibility in its traditionally staunch commitment to long-term agreements.
Moreover China has become the most influential growth market, importing over 180 million metric tons of coal in 2011, up almost 10% year-on-year, overtaking Japan for the first time in decades.
Demand for physical Newcastle coal at the traditional 6,300 kcal/kg GAR calorific value has plummeted for every destination except Japan.
Sustained high prices of FOB Newcastle 6,300 kcal/kg quality coal priced many buyers out of the spot market and began to reduce demand from early 2010.
While exact figures for the FOB Newcastle 5,500 NAR product are difficult to quantify, research indicates that the vast majority of thermal coal tonnage exported from Australia fell into the lower calorific value category.