Out-of-kilter Newcastle 6,000 NAR thermal coal prices put future of Asian benchmark in question

In Asia Pacific thermal coal circles it is known as the “great decoupling” and refers to the yawning gap between spot traded prices for Newcastle 6,000 NAR thermal coal and another grade of Newcastle thermal coal, 5,500 kcal/kg NAR. That gap has blown out to an unprecedented $50/mt, from only $10/mt in early February, and the phenomenon has not gone unnoticed in wider business circles. A September 12 report in the London Financial Times headlined “Why Asia needs a new thermal coal price benchmark” discusses this dramatic price gap and speculates that it might imperil existing benchmark indices for the 6,000 kcal/kg NAR grade. Proponents of high prices for Newcastle 6,000 kcal/kg NAR coal insist supply of this specification remains tight due to underinvestment in Australia’s coal sector and recent industry consolidation. Others are unconvinced, pointing to the small number of spot trades for this grade at irregular intervals, and clustered around the time of Japanese contract price talks. The price gap could be squeezed sooner than many expect, as Japan quietly moves to restart a number of its stalled nuclear power generators left idle since the Fukushima accident in 2011. Newcastle 6,000 kcal/kg NAR benchmark prices also appear to… continue reading

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Source: CTRM Center

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