Asia Coal-Prices drop to 21-mth low, hover just abPERTH, March 9 (Reuters) - Prices of power-station coal
from Australia, a benchmark for Asia, fell for the fourth week
to a 21-month low of just above $61 a tonne, as supplies
continue to build because of plummeting demand from the
industrial sector.
Industry sources said the recent sharp drop in prices has
significantly widened the gap in price expectations between
Japanese utilities and Australian producers for 2009 term
contract negotiations, which are expected to be long drawn out
as both parties find it tough to find a middle ground on
prices. Thermal coal prices on the globalCOAL Newcastle weekly
index fell $4.02 from a week ago to $61.30 a tonne in the week
ended March 6. Prices are also down 87 cents from the middle of
last week. Prices are now at their lowest since June 12, 2007, when
they stood at $60.94 a tonne.
"The market is very weak and there's plenty of coal out
there," said an Indonesian producer. "Big Australian producers
also seem to be flooding the market as they are under pressure
to fulfill their export quotas at the port."
In a further sign of sagging demand, trade sources said
Australia's Newcastle coal port -- the world's largest coal
export terminal -- was being under-utilised for the first time
in years, with ship queues now hovering at their lowest in more
than two years and some key producers not being able to fulfill
their allocated export quotas.
"Some of the rail assets have been idle and that's a really
rare sight. It speaks volumes about the demand situation," said
a Sydney-based coal trader.
Japanese utilities have begun what could be lengthy talks
with some Australian miners for 2009 thermal coal contracts,
but negotiations have hit a snag with Xstrata (XTA.L) holding
on to its previous offer price of $78 a tonne. [ID:nSYD411286]
Trade sources said marketing executives from Xstrata had
left Tokyo late last week with little progress in the
negotiations. Japanese utilities have also not yet made a
counter-offer on price.
Coal is the cheapest source of thermal energy used in
industrial sector, with the cement industry one of the largest
buyers. But demand has swiftly faded as the global economic
downturn forced strings of factories across Europe and China to
halt production as exports slumped.
Spot thermal coal prices have shed nearly 70 percent since
striking a record high of $201 a tonne last July, pressured by
slumping demand from the industrial sector and increased
supplies as producers divert more low-grade coking coal
material to the power generation market as demand from
steelmills slump.
(Editing by Ben Tan)
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