Thermal coal’s turn to edge downwards
Recent negotiations with Japanese utilities is likely to see the thermal coal price contracted at US$82/tonne for the year to March 2015, according to Macquarie Research.
This is down 14 per cent from US$95/tonne in the current Japanese financial year (to 31 March 2014) and the lowest level in five years.
Over the past year, the AUD/USD exchange rate has declined nearly 14 per cent from US$1.04 to US$0.90, assisting Australian thermal coal producers.
The contracted price peaked in the year to March 2012 at US$136/tonne.
In recent months, the spot thermal coal price out of Newcastle has come back 13 per cent, from US$86/tonne to US$75/tonne, while the AUD/USD exchange rate has risen slightly.
Despite increased export volumes, it seems to us that earnings forecasts for Australia’s bulk commodity producers could edge down somewhat over the foreseeable future, unless the Australian dollar gaps down towards US$0.80.
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