PERTH Feb 4 Australian thermal coal benchmark
prices rose to around $95 a tonne last week for their biggest
weekly gain in nearly two months as heavy rains in the country's
east coast stoked supply worries after two major coal producers
declared force majeure on their deliveries.
But after a year in which global coal prices dropped due to
plentiful inventories, some industry sources said concerns about
a major supply shortage due to the rains were overblown.
"All consumers and producers are well stocked," one
Sydney-based market source said.
"Unlike other times when we've had supply disruptions and we
immediately see buyers come to market, we've not heard a peep,"
the source added.
Australia's Newcastle spot index rose 2.4
percent to $95.04 per tonne on Friday from $92.77 per tonne last
week, data from online trading platform globalCOAL showed.
Rio Tinto and Xstrata both declared force
majeure on coal deliveries from Australia's Queensland state
after flooding shut a key rail link to ports which will be
reopened this week.
Rio Tinto declared force majeure on shipments out of its
Kestrel coking and thermal coal mine, while Xstrata said only
thermal coal shipments were affected.
But the fact that miners in Australia's Hunter Valley, the
country's biggest thermal coal producing region, were not as
hard hit, indicated that the impact on prices will be
short-lived, some market sources said.
Although the key Hunter Valley region has not been hit hard,
the spectre of further rains will likely boost prices for
Australian producers' annual coal contracts with Japan.
Xstrata typically sets the price with a major Japanese
utility, often Tokyo Electric Power (TEPCO),
negotiating on behalf of Japanese buyers, setting the precedent
for the rest of the industry.
The annual contract begins at the start of the Japanese
financial year, on April 1, and is the largest of the year in
terms of volume.
"This flooding will definitely affect the negotiations
between Xstrata and Japanese utilities... people are concerned
about further (weather-related) risk," another Sydney-based
Long-term contract prices are typically a few dollars above
the Australian coal benchmark price, a premium usually explained
by security of supply, and market sources said they expect
Xstrata to push for a price over $100 per tonne.
The spread between the spot price and the contract price has
been widening since the March 2011 Fukushima nuclear crisis.