Asia Coal-Australia thermal coal prices dip slightly in week

PERTH, March 30 Wed Mar 30, 2011 12:05am EDT

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PERTH, March 30 (Reuters) - Australia's thermal coal prices, a benchmark for Asia, dipped slightly as the short-term drop in Japanese coal demand kept pressure on prices after a deadly earthquake earlier this month.

Australia's thermal coal prices on the globalCOAL weekly index, a benchmark for Asia, closed at $122.02 per tonne for the week to date on Tuesday, down slightly from $122.98 a week earlier.

The earthquake and subsequent tsunami in Japan shut several power plants and ports and forced at least two major utilities, Tokyo Electric Power and Tohoku Electric to declare force majeure on coal deliveries.

Indonesian coal shipments totalling 500,000 tonnes were delayed due to the quake and about 5 million tonnes on Indonesian coal will be delayed during the year. [ID:nL3E7ET165]

Japan is Indonesia's largest coal customer. Japan's utilities have rerouted coal cargoes to domestic utilities as internationally, particularly to South Korea and Taiwan.

Available supplies of Australian coal also increased during the past week, with exports of coal from Australia's largest thermal coal port increasing 10 percent in the week ending Monday as

"There has been some Newcastle coal that has been freed up, we've seen some tonnes back in the market which may not necessarily be a sign of Japanese force majeures, but that the Australian scenario might be improving," one trader in Singapore said.

Most of Australia's coal is produced in New South Wales, where production has slowed in the last months due to wet weather, although mines in the region escaped the large-scale deluges that hit neighboring Queensland state.

But traders and analysts said pressure on prices will be short-lived.

"The recent spot correction simply reflects the impact of tonnes diverted from damaged Japanese ports and utilities to India and China; once this trade re-balances, spot should return to pre-event levels," Tom Price, an analyst at UBS in Sydney said in a note.

China, the world's largest producer as well as consumer of coal remained on the sidelines of thermal coal trade, with the arbitrage shut as domestic thermal coal prices nudged up to 780 yuan ($118.82) in the latest week.

Utilities and other end-users were re-entering the market to replenish stockpiles ahead of a month-long scheduled maintenance of a main rail line, but prices were still too high for any serious buying interest from China in the international market.[ID:nL3E7ET08C]

European coal prices also slipped in thinner trading and higher offers from European utilities.[ID:nLDE72S20Q]

WEEK AHEAD

Xstrata met with Japanese utilities to restart the annual thermal coal contract negotiations last week after the talks were interrupted by the earthquake.

The utilities will be represented Chugoku Electric Power and market sources said they anticipated that the talks could drag on for several weeks and be settled well after the April 1 start of the Japanese fiscal year, when the thermal coal contracts are set to begin.

Estimates of the contract price, which serves as a benchmark for much of Asia, range from just under $130 per tonne to around $140 per tonne.

ADDITIONAL REUTERS COAL COVERAGE:

RECURRING MARKET REPORTS

European physical market............

European swaps market...............

Australian spot prices..............

North America coal market...........

STOCKS AND IMPORT/EXPORT DATA

Australia Newcastle stocks..........

S. Africa's Richards Bay stocks.....

TRADES AND TENDERS Spot trades... [COAL/TRADE\]

Coal tenders...

COAL PRICES

McCloskeys weekly physical spot/freight prices..<0#MCC-CASH>

API4 coal paper prices, McCloskeys............<0#MCC-C-API4>

API2 coal paper prices, McCloskeys............<0#MCC-C-API2> (Reporting by Rebekah Kebede; Editing by Ed Lane)

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