What the failed Glencore-Tohoku coal talks mean for the market

TOKYO/SINGAPORE (Reuters) – 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 (9506.T), a major Japanese utility, and Glencore (GLEN.L), the world’s biggest exporter of seaborne thermal coal, abandoned the talks last month on their annual Australian supply contract. “Both parties seem to have tried hard to come to a consensus but always had large difference in price expectations this year,” energy consultancy Wood Mackenzie said in a note to clients. 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. For graphic on Australian thermal coal price hits $120/ton click reut.rs/2INPBls WHAT WENT WRONG? Japan’s… continue reading

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