Japan and Australia are to resume thermal coal contract price negotiations late this week or early next, with one Japanese source saying Wednesday he hoped Australian producer Xstrata would factor in the disasters that have struck Japan to avoid protracted negotiations.
The Japanese fiscal year begins April 1, with no FY 2011 prices having yet been revealed after negotiations held this month.
The source said it would be difficult for buyers to consider an offer as high as $130/mt FOB. "The point is if Xstrata is amenable to lowering its expectation to a price lower than $130."
Macquarie Bank lowered its FY 2011 forecast for the Australian thermal coal contract price settlement in Japan by $20/mt, taking into account the impact of depressed demand caused by the March 11 earthquake and tsunami disaster.
Macquarie forecast an FY 2011 contract price settlement of around $125/mt March 28, a decline from a previous forecast of $145/mt.
The Japanese source said Newcastle spot price trends were lower still, however, at sub-$125/mt levels.
"If this trend continues, it will not be strange for the Japanese power utilities to expect a price of $120/mt or lower," the Japanese source said.
He added that $120/mt was still comparatively high compared with the $115/mt FOB price for Australian coal under contract in Japan for Calendar 2011, saying he hoped Xstrata would factor in humanitarian considerations considering the long and relatively amicable business relationships between Xstrata and thermal coal buyers in Japan.
The source said he could not say with certainty where price expectations stood between Xstrata and the Japanese power utilities, adding that if the discrepancy was huge it would be useless to expect a price settlement before the 2011 fiscal year began.
However, he disagreed with the analysis that there would be no lead FY 2011 thermal contract price settlement in Japan, saying that any price settled by Chugoku Electric would be no different from what Xstrata would ask of the other Japanese power utilities.
In the event of protracted negotiations, the source said Xstrata would continue to deliver coal at provisional prices of $97.75/mt -- the FY 2010 steam coal contract price settled by Xstrata in Japan.
