March 20, 2015 / 8:11 AM / 5 years ago

Japan utilities seek steeper coal import discount as glut mounts

SYDNEY/TOKYO, March 20 (Reuters) - Japanese utilities are seeking a steeper discount on next year’s thermal coal price contracts than the 15 percent foreign mining companies are willing to accept, sources said on Friday.

The contracts, covering around 50 million tonnes of Australian thermal coal delivered between April 1, 2015 and March 31, 2016 were close to being settled at around $69 a tonne until index prices again turned downward, the sources said.

The world’s biggest thermal coal exporter, Glencore , and Tohoku Electric Power Co last year settled the first Japanese annual Australian thermal-coal import contract at $81.80 per tonne.

Both companies declined to comment on the current negotiations, which are expected to run close to the end of March.

The benchmark Newcastle coal contract settled below $60 a tonne Thursday for the first time since 2007.

The push by the utilities for a lower settlement price underscores a mounting supply glut for thermal coal worldwide.

In past years, the prices for contracted coal by Japan - about 60 million tonnes - typically settled at around a $7-per-tonne premium to spot prices.

ANZ Bank has forecast $70 a tonne from $75, while National Australia Bank put it at $72.50.

Policies in China, the world’s biggest coal producer and importer have continued to reverberate this year, contributing to the glut as it curbs imports to cut down on pollution and support its own mines.

“It’s really tough to figure out an appropriate price for an annual contract this time as spot coal prices have been so volatile and futures prices have been under pressure,” said a source overseeing coal procurement at a utility in Japan.

“For a buyer, the cheaper the better. But we also have to consider our long-term relationship with suppliers,” he said.

The miners are said to be willing to accept around $69, saying that would represent a nearly flat outcome year-on-year given the movements in the Australian dollar and Japanese yen. (Editing by Ed Davies)

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