Glencore lowers Australian Thermal Coal's Contract Price for Japan's Tohoku Electric
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The contract price between global miner, Glencore and Japan's Tohoku Electric Power which serves as an industry benchmark for supplies of seaborne thermal coal (6300kacl/kg) in Asia has been set as USD 68.75/MT till Mar'21.
This is down by 27% against the last year's contract price of USD 94.75/MT. The price set is lowest since 2016.
Glencore has two annual benchmark supply contracts with Japanese utilities, typically negotiated by Tohoku Electric (country's 4th largest electric-utility firm in terms of revenues), one for April through March and the other for October through September that takes account for later market conditions.
Japanese utilities, which buy about 40% of Australia's thermal coal exports, have a relationship with Glencore and its predecessors since over 30 years.
The two sides typically fix the annual price for thermal coal supplies in the early year. These prices are then published by media and used by utilities in Thailand, Taiwan and Malaysia for their own contracts.
In case the contract price between Glencore and Tohoku is not finalised, which actually happened in 2018, the Japanese power utilities need to find another reference price for their annual supplies or they buy from the spot market.
However, finding another benchmark is difficult because the coal market is more opaque than other commodities such as crude oil, where exchanges readily publish futures prices.
Due to the ongoing pandemic, the Australian thermal coal prices have touched two-year lows at USD 53/MT in last week of April.
Newcastle port's high-calorie thermal coal is mainly exported to Japan, South Korea and China. Last year, Japan's imported about 111 MnT of thermal coal which accounted for nearly 70% of Australian coal exports.
