News out of Japan is that Australia’s largest coal producers are to agree to a 40% cut in thermal coal prices. The final price is expected to be in the range of US$70 – US$72 per tonne, sharply down from the US$125 per tonne that Japanese companies have been paying for their thermal coal.
This cut represents a $5 billion cut in export earnings for Australia.
You know that times are really not so good for the Australian mining industry when companies can take that sort of cut and be convinced that this is a good result for them.
When you look at the spot price hovering around US$60 per tonne, you realise that the companies might be right in their enthusiasm.
Although down 40% from last year, this year’s price will still be the second highest price paid by the Japanese companies. It is also still far higher than the contracted price just 2 years ago.
The slightly better that expected thermal coal prices being negotiated have given hope that the coking coal prices will not be hit as hard as previously expected.
Australia’s iron ore producers are expecting a 30% cut in prices from the current US$100 per tonne.