Glencore lands thermal coal supply deal for $95 a tonne with Japanese utilities in one-third price boost
Glencore has signed a year-long contract to supply Japanese utility companies with Australian thermal coal for almost $95 a tonne.
The spot price of Australian thermal coal, which is the Pacific benchmark, reached $100 last week for the first time in four years.
The material is mostly used in power generation and has rallied to almost double since June.
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Spiking coal prices have been triggered by cuts to the number of working days at domestic mines in China, which has prompted electricity generators and steelmakers in the economic powerhouse to make up for a shortfall via imports, triggering an international rally in the process.
Market analysts have been sceptical that the recent surge will last for long into next year. However, Glencore's 12-month deal with Tohoku, which also negotiates on behalf of other Japanese utility groups, indicates prices could last.
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"Given that the Australian coal spot prices were less than $60 per tonne four months ago, and as there are questions about how sustainable this price will be, this is a good deal for Glencore," said Gareth Carpenter, associate editorial director of coal at S&P Global Platts.
"It's about 46 per cent higher than the agreement they reached for tonnage in October 2015, which was around $64.
"With regards to the question mark about sustainability, this is because of speculation that the Chinese government wants to reverse the mining cuts to tackle the rise in domestic coal prices."
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Coal-fired power plants supply around 41 per cent of global electricity, according to the World Coal Association.