Spot Australian thermal coal prices edged higher over the past week, driven by lingering supply shortfalls after Colombian mine strikes and a local port bottleneck caused by railway maintenance and softer production.
Thermal coal, used for power generation, rose 58 cents or 1.1 percent to $52.33 per tonne in the week ending June 30, the globalCOAL NEWC index showed, based on free-on-board (FOB) prices loaded at Australia’s Newcastle port.
It marks a change in direction for prices that had been falling steadily from April peaks above $53.00. Prices for the week were 0.2 percent below the overall June average of $52.44.
“The Colombian strikes took around 5 million tonnes off the market,” said Graham Wailes of AME Mineral Economics in Sydney. “Even though they are resolved they are still influencing prices, as is the freight situation at local level.”
Colombia’s mining and energy union ended strikes at two of the South American country’s largest mines in June after reaching settlements.
The waiting time for coal vessels to load at Newcastle port rose to its longest in seven weeks due to congestion caused by lower-than-usual production at mines, railway maintenance and an increase in demand from Japanese utilities.
Despite the queues, exports from the world’s biggest coal shipment facility are expected to hit a record-high this month, with exports over the week climbing to 1.7 million tonnes, about 420,000 tonnes or a third more than the previous week.
The Newcastle Port Corporation projected coal exports for the whole of July to rise 10.8 percent from June to 7.751 million tonnes, which would surpass last October’s record by 105,000 tonnes.
Australia is the world’s second-biggest exporter of thermal coal after Indonesia, shipping 108 million tonnes in 2005, largely from Hunter Valley mines operated by global giants Rio Tinto , Xstrata and BHP Billiton .
Prices have surged from below $40 in late 2005 as China keeps a greater share of its production for domestic use, demand from importers soared through a cold winter and exports from Indonesia and South Africa were disrupted by heavy rains and rail strikes.
The prolonged period of high prices has coincided with lengthy negotiations between Australian producers and Japanese power companies on benchmark pricing contracts for the Japanese fiscal year, which began in April.
Reports on Wednesday said producers were close to concluding talks, with Xstrata representatives said to be returning to Australia after narrowing the negotiating divide to between $52.00 and $52.50 a tonne, close to a rollover on prices of between $52.00 and $54.00 for the previous fiscal year.
“If those prices are confirmed, it represents long-term contracts at close to last year’s prices,” said AME Mineral Economics’ Wailes.
“That’s a product of sustained strong demand and supply struggling to keep up, and would be a much stronger outcome than we might have been looking at a few months ago.”
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