PERTH Feb 15 Australia's thermal coal prices, a benchmark for Asia, climbed to over $126 per tonne as news of a force majeure at Xstrata's Ulan mine in New South Wales boosted prices.
Thermal coal on the globalCOAL Newcastle index for the week to date was $126.28 per tonne on Monday, up from $125 a week earlier and up $3.82 from $122.46 on Friday.
But traders both in Europe and Asia said firm prices may be short-lived.
"The demand from China has not picked up yet and India is still looking at $5 to $10 below the market," one Singapore-based trade source said.
Coal markets have been watching for the return of Chinese demand, which slowed in recent months as high prices made domestic coal more attractive for Chinese buyers.
Xstrata said its force majeure at Ulan was due to significant underground water following recent heavy rains in the area.
The force majeure, legal let-out suspending sales obligations due to factors beyond a supplier's control, follows several force majeure's in neighboring Queensland state in December and January.
New South Wales had been largely unaffected by Queensland's floods, and the rains affecting Xstrata's Ulan mine have so far had limited impact, according to a spokesman for one of the coal export terminals at the Newcastle Port.
"Port Waratah Coal Services coal loading activities have not been significantly impacted by rain," Port Waratah's spokesman Matthew Watson said.
"There have been some delays with coal arrivals at the terminal due to isolated issues at a couple of individual mines, but this is not deemed significant."
In Queensland, there were indications that some mines are still struggling to return to full production, with the state's largest coal terminal, Dalrymple Bay exporting at 40 percent of normal volumes due to the lack of coal availability.
The market will continue to keep an eye on weather in New South Wales following Xstrata's force majeure declaration on its Ulan mine. There are two mines very near Ulan-- Peabody's Wilpinjong and Yancoal's Moolarben.
Japan's annual contract negotiations with Australian producers have been launched, and traders will be eagerly waiting to hear of any concrete results from the negotiations. Analysts have generally agreed the contract is likely to meet or exceed the 2008 record. (Editing by Ed Lane)