Thermal Coal
Record 6300–5500 Price Gap to Endure in August
August 2018
The spot price for premium Newcastle 6300 thermal coal remained strong in July, persisting above US$120/t for the majority of the month as market tightness endured. By contrast, the spot price for high-ash Newcastle 5500 products dropped 8.5% month on month to average US$73/t.

This was primarily driven by low buying interest from China amid strong hydro electricity generation and difficulty getting imported shipments cleared through southern ports. The price spread between 6300 and 5500 thermal coal FOB Newcastle exceeded US$50/t at the end of July, the largest difference ever recorded since the high-ash spot market developed in 2012. As Hunter Valley coal producers are thought to be already maximising 6300 production through additional washing and selective mining, there are limited opportunities for output increases from the region for the remainder of 2018. As a result, spot prices are anticipated to remain well supported if current demand levels persist.

Commodity giant Glencore reportedly signed thermal coal supply contracts for the 2018–2019 Japanese Fiscal Year with several smaller Japanese power utilities at US$110/t FOB Australia. This comes after Glencore and Tohoku Electric abandoned talks after failing to reach an agreement, leaving the market without a reference price for the first time since the system was adopted over thirty years ago.

Elsewhere, spot prices for FOB Kalimantan 4200 and 3800 thermal coal averaged US$47/t and US$38/t in July, down 4% and flat month on month, respectively. The spot price for Russian thermal coal into the Pacific market averaged US$120/t in July, up 5.3% from June, resulting in a price advantage into Asian markets compared to products from Australia. In the Atlantic market, the spot price for Colombian 6000 thermal coal averaged US$93/t in July, increasing 4% month on month.