Perth — A sizable jump Wednesday in Newcastle 6,000 kcal/kg NAR prompt-month prices of $4.25/mt from the last screen trade Friday to $58.50/mt FOB, after positions in the price talks on Japanese supply contracts starting April 1 narrowed, market sources said.
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An April-loading Newcastle 6,000 kcal/kg NAR parcel for 30,000 mt traded on screen at $58.50/mt FOB after being bid at $58/mt earlier in the Asia trading window.
A May-loading 30,000 mt shipment of this grade was bid at the lower price of $52.50/mt FOB Newcastle, and for June there was a bid-offer spread of $51.50-$50.40/mt for 30,000 mt and 25,000 mt, respectively, on globalCOAL.
The two sides in the talks, Japanese utility Tohoku Electric Power, and Australian coal producer Glencore are discussing prices for Newcastle thermal coal shipments over the 2016-17 fiscal year.
Tohoku Electric is understood to have put forward a price of $58/mt in the talks this week, to Glencore's position of $64/mt on a 6,322 kcal/kg GAR price basis, equivalent to 6,000 kcal/kg NAR, sources said.
"$58/mt FOB is already a good number," a market participant said.
Sources said the talks still had some distance to go to settle a price by the April 1 deadline, even with the intervening Easter holiday this weekend.
The price gap has narrowed from a week ago, when Tohoku's negotiators wanted a deal in the low $50s/mt FOB, basis 6,322 kcal/kg GAR, to Glencore's target of a price in the $60s/mt, sources said.
Newcastle market participants said it was difficult to trade Newcastle cargoes while the price talks were ongoing and prices remain volatile.
A price settlement in the range of $58-$64/mt FOB Newcastle would represent a significant fall from previous price staging posts in April and October last year, and could be the lowest outcome since 2007.
Tohoku and Glencore negotiated a price of $64.60/mt FOB Newcastle for their October 2015-year contract for Australian 6,322 kcal/kg GAR cargoes, and had agreed a price of $67.80/mt for last April's fiscal-year contract.
The last time there was a price in the $50s/mt FOB Newcastle for Japanese April year contracts was $55.50/mt in 2007-08, according to market sources.
The tonnage involved in fixed-price April contracts for the Japanese market has varied from 20 million to 40 million mt, industry sources said.
Tohoku Electric Power has stuck with fixed-price negotiations for its term contracts with Australian coal producers.
Two other Japanese power utilities, Tokyo Electric and Chubu Electric, have moved over to floating market prices for their contracts for calendar 2016.
--Mike Cooper, firstname.lastname@example.org
--Edited by Jonathan Dart, email@example.com