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Glencore and Tohoku coal price talks fails

Coal News - Published on Mon, 09 Jul 2018

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Reuetrs reported that electric utilities in Japan and other Asian countries are driving blind when it comes to coal prices after the failure of Japan's Tohoku Electric and Glencore to agree on an annual thermal coal contract that is used to set prices for the region. Tohoku Electric, a major Japanese utility, and Glencore, the world's biggest exporter of seaborne thermal coal, abandoned the talks last month on their annual Australian supply contract.

Wood Mackenzie energy consultancy said in a note to clients that "Both parties seem to have tried hard to come to a consensus but always had large difference in price expectations this year."

Coal prices spiked as Japanese and Asian utilities jumped into the spot market to cover their needs after the talks broke down. Companies that were relying on the talks to set a price for their previously delivered cargoes and future shipments under their April to March contracts now lack a reference for netting out prior payments based on temporary prices. The collapse of this year's talks has raised questions about the industry's dependence on this method of setting prices.

Japan's utilities, which buy about 40 % of Australia's thermal coal exports, have a relationship with Glencore and its predecessors that goes back over 30 years. The two sides typically sit down early in the year to negotiate fixed prices for annual supplies for April to March. Those prices are published by media and used by utilities in Thailand, Taiwan and Malaysia for their own contracts. However, during the talks this year, spot coal prices rose, making it difficult for the sides to settle on a contract.

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Posted By : Joykumar Irom on Mon, 09 Jul 2018
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