China, Japan in Coal Price-Hike Deal

Coal miners in the north of China have agreed with Japanese buyers on a 2007 price hike of about 28% for thermal coal, while other suppliers have unprecedentedly refused to join the deal, Shenzhen Daily reported. Due to strong demand in China, which has pushed up domestic prices to historic highs, domestic miners are reluctant to sell much of the fuel abroad, especially as the government has scrapped tax rebates in an effort to keep more of the resource at home. During may, the China Coal Trading Association said the suppliers had settled prices for 2007 at $67.90/ton, free-on-board (FOB) basis. The price was about 28% higher than the $53 agreed between China and Japan last year, and well above the settlement price of $56 agreed between Australian coal producers and Japanese utilities this year. The gap between the Chinese and Australian prices reflects in part the difference in freight costs, which have surged to record highs this year due to China’s voracious demand for iron ore.

But industry officials said some miners in Shandong, such as Yanzhou Coal Mining Co., had rejected the agreement, asking for prices above $80/ton, FOB. Yanzhou said it would cut by half exports in 2007 to 3 million metric tons due to higher domestic prices. So far this year, China has emerged a net coal importer for the first time in history, with exports falling 28.6% to 16 million mt in the first four months, while imports jumped 50.4% to 19 million mt during the period.