Glencore and Tohoku Electric have agreed upon annual thermal coal price for high-grade Australian coal that will set the benchmark for future coal contracts.
Glencore (an acronym for Global Energy Commodity Resources) is an Anglo-Swiss multinational commodity trading and mining company involved in coal mining in Australia.
Glencore was in negotiations with Tohoku Electric over the Australian thermal coal prices, to be supplied to the Japanese utility. However, after the initial talks were failed- both companies agreed on the contract for Australian 6000 NAR thermal coal supplies at a price of USD 84.97/MT.
According to the contract, Glencore would have to supply Australian 6000 NAR coal loaded from Newcastle port to Tohoku’s power plants in Japan for a year between April to March at the settled price.
Although the concluding price of USD 84.97/MT was lower than Glencore’s opening shot of USD 95/MT, yet it was well above last year’s settlement price of USD 61.10/MT and current market price of Australian 6000 NAR coal assessed at USD 77/MT last week.
The current agreed-upon price represents the highest benchmark since USD 95/MT set during 2013.
The significance of the Deal:
Glencore would make a sound profit from the deal, as the concluding price is significantly above the company’s production cost of USD 44/MT.
The price would serve as a benchmark for future major contracts in Japan because its power utilities prefer long-term contracts for Australian coal which works well in boilers and meet environment norms.
Also, other major coal buyers and Australian coal producers will likely use this price as a set point for their contract negotiations.
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