Japanese power, Australian coal producers to resume contract price talks
Platts /8 Apr 2013

More talks have been scheduled between Australian coal producers and their Japanese power utility customers in an attempt to reach a settlement for Japanese financial year (April-March) contract prices which have become deadlocked, market sources said Monday.

Talks overran their April 1 target date this year, and, in an effort to reach a settlement, an Australian thermal coal supplier has agreed to meet Tohoku Electric Power this week and possibly next week, said industry sources.

"Now the prices seem to be in the range of $94-97/mt FOB [basis 6,322 kcal/kg gross-as-received] for the talks, and those numbers could seriously hit the supply capability of the Australian thermal coal industry," said one market participant familiar with the matter.

A price outcome of this kind would be much lower than last year's contract price settlement of $115/mt FOB Newcastle for annual, April-March fuel supply agreements. 



Both sides have struggled to achieve a price settlement in Japan this year, partly because spot prices for Newcastle 6,300 kcal/kg GAR coal have continued to trade at sub-$90/mt, FOB Newcastle.

In the Asian trading window Monday, May and June parcels of Newcastle 6,000 kcal/kg NAR thermal coal were bid at $87-87.50/mt, while July-loading coal from Newcastle was offered at $88.75/mt on globalCOAL.

Indications are that some Japanese power utilities, such as Tokyo Electric and J-Power will require more imported thermal coal this year as new plants come online.

Tepco is expected to test fire new boilers at its Hitachinaka and Hirono power plants this month and the Tokyo-based utility is upgrading its Onahama coal transfer station to handle more imports.

"Since Tepco will increase its thermal coal consumption by more than 3 million mt per annum, it is planned to increase [volumes] in each of its term contracts [January, April, July and October]," said the market participant.

Japan's minister for economy said on a visit to J-Power's 600 MW Isogo supercritical coal-fired plant last week that the government wanted build at least one new high efficiency coal plant in the country, according to market sources.

The reason is that coal was the cheapest cost fuel for power generation in Japan at Yen 5/KWh ($0.05/KWh), compared with LNG at Yen 13/KWh and fuel oil at Yen 16/KWh.

--Mike Cooper, michael_cooper@platts.com
--Edited by Jonathan Dart, jonathan_dart@platts.com