2018-07-08 15:15:04 UTC
What the failed Glencore-Tohoku coal talks mean for the market
08 Jul 2018 04:41 am JST
Yuka Obayashi and Henning Gloystein
Tokyo. Electric utilities in Japan and other Asian countries are
driving blind when it comes to coal prices after the failure of
Japan's Tohoku Electric and Glencore to agree on an annual thermal
coal contract that is used to set prices for the region.
Tohoku Electri, a major Japanese utility, and Glencore, the world's
biggest exporter of seaborne thermal coal, abandoned the talks last
month on their annual Australian supply contract.
"Both parties seem to have tried hard to come to a consensus but
always had large difference in price expectations this year," energy
consultancy Wood Mackenzie said in a note to clients.
Coal prices spiked as Japanese and Asian utilities jumped into the
spot market to cover their needs after the talks broke down.
Companies that were relying on the talks to set a price for their
previously delivered cargoes and future shipments under their April to
March contracts now lack a reference for netting out prior payments
based on temporary prices.
The collapse of this year's talks has raised questions about the
industry's dependence on this method of setting prices.
WHAT WENT WRONG?
Japan's utilities, which buy about 40% of Australia's thermal
coal exports, have a relationship with Glencore and its predecessors
that goes back over 30 years.
The 2 sides typically sit down early in the year to negotiate fixed
prices for annual supplies for April to March.
Those prices are published by media and used by utilities in Thailand,
Taiwan and Malaysia for their own contracts.
However, during the talks this year, spot coal prices rose, making it
difficult for the sides to settle on a contract.
"Because Tohoku already signed some deals with smaller suppliers when
spot prices were lower, they were not willing to pay significantly
more for coal from their biggest supplier, Glencore," said one source
with knowledge of the matter who declined to be named as he was not
authorized to speak publicly about commercial deals.
"Glencore had the opposite view. They were unwilling to agree to a
supply deal significantly below spot market prices," the source added.
WHY DOES IT MATTER?
Without this year's deal, utilities need to find another reference
price for their annual supplies or they can buy in the spot market.
Finding another benchmark is difficult because the coal market is more
opaque than other commodities such as crude oil, where exchanges
readily publish futures prices.
Japan flooding and landslides kill dozens as mns are ordered to
* 'This is a once every 1,000-year flood and we've had 2 of them in
* Oman cyclone brings 3 years' rainfall in single day
* Rescuers form human chain to pull woman from raging floods
ABC News, 07 Jul 2018 15:06Z
At least 51 people have died and many more are missing after heavy rains
caused flooding and landslides across much of western Japan.
* In Motoyama, near Tokyo, 583 millimetres of rain fell between Fri and
* Heavy rains are expected to continue through Sun
* 48,000 police, firefighters and Self-Defence Force personnel have
responded to calls for help
Hiroshima Prefecture was hit the hardest with numerous landslides that
killed at least 15 people and authorities have warned that the death toll
will continue to rise.
Many of the dead had ignored evacuation orders, choosing to stay in their
homes despite warnings.
Almost 5 mn people have been told to evacuate as homes have been
destroyed and cars swept away.
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Record torrential rains across western and central Japan unleashed flooding
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Line of ambulances arrive at Thai rescue scene
ABC News, 08 Jul 2018 03:08Z
Chiang Rai. A convoy of ambulances has arrived at the cave complex in N
Thailand were a football team and their coach have been trapped for more
than a wk. With rainfall threatening to undo days of pumping aiming at
drying out 4 km of sometimes narrow passageway to allow the trapped
team to escape, it's suspected a rescue attempt is about to shift
into high gear. In local news it's being reported the boys have been
moved via a dried-out tunnel to another area from where they may be
rescued in the next day or 2. British scuba divers have been teaching
some of the children how to use full-face masks, although other experts
say diving them out is the most dangerous option. Elsewhere, dozens of
shafts have been drilled down 100s of m from the top of the mountain
in another attempt to get air to the trapped group or create a back
door way out.
Thai authorities confirm, rescue is underway
ABC News, Sun Jul 8 14:30:39 EST 2018
Officials say the trapped football team will be helped out of the
cave complex over the next few hours. The operation started about 90
mins ago. Reporters on the scene say 100s of ox tanks have been
assembled in the past day. They say at present none of the rescued
boys has emerged from the caves. Officials have pushed the media about
2 km back from the cave entrance. The operation supposedly will be
completed over the next ~10 hrs. Expert divers will guide the boys
through 4 km of narrow passages, some filled with fast-flowing water,
where even a strong swimmer could have trouble getting through. In a
weakened state after more than 9 days without adequate food they will
need to dive using full-face masks through muddy water for up to 15
mins at a time. Heavy rains in the area overnight are believed to be
the reason for moving from a wait-and-see to a rapid extraction attempt.
The Trump administration has released a national climate change
assessment, confirming that extreme weather events - storms on
steroids - are becoming more frequent and intense.
-- The Conversation US, 07 Jul 2018