SYDNEY – Glencore and Japanese power utilities have settled quarterly thermal coal contract prices at $94.75/t, up from around $64 last quarter, sources confirmed on Tuesday, reflecting a surge in spot prices.
The Japanese buyers agreed to pay the higher price to secure supplies of high-quality thermal coal from Australia, the Financial Times reported overnight.
Glencore reached the settlement with Japan's Tohoku Electric following two months of negotiations, an industry source with knowledge of the matter said.
"We were told it came in at $94.75, which was not unexpected given the surge in spot," added a coal trader in Sydney.
Australian Newcastle spot cargo prices for November have almost doubled since June to $100.25/t, the highest since 2012.
The price rally for thermal coal, used to generate electricity, was triggered by a Chinese government decision to cap its mining output to address labour issues and pollution, forcing its utilities to import more coal.
The intervention cut China's mining output by around 15% and sent buyers back to global markets to meet the shortfall.
Glencore is the world's biggest supplier of sea-traded thermal coal and typically sets pricing for the sector.
Glencore declined to comment, citing a policy against speaking publicly about price negotiations with its customers.
Japan's thermal coal imports remained stable year-on-year in the first six months of 2016, reflecting a slower-than-expected restart of nuclear power capacity and steady use of coal-fired power generation as a substitute.
Australia's thermal coal exports in fiscal 2017 ending June 30 are forecast to increase 1.6% year-on-year to 204-million tonnes, with China's spike in import demand in the first half of the year more than offsetting declines in India, according to Australia's Department of Industry and Science.