Asia Coal-Australian thermal weak on Japan demand, but bottom seen - Reuters

Australia's thermal coal prices, a benchmark for Asia, extended their decline during the past week as near-term weakness in Japanese demand weighed on the market. But traders said prices may have bottomed out, as coal cargoes turned away from some Japanese utilities found homes.

Thermal coal on the globalCOAL Newcastle index for the week to date was $122.98 per tonne on Tuesday, down from $126.32 a week earlier and from $123.29 on Friday. Prices have fallen by more than 5 percent since a deadly earthquake and tsunami hit Japan in early March, as at least two major Japanese utilities declared force majeure on deliveries due to damaged ports and shut power plants. But excess supplies have largely found homes with other Japanese utilities, or swapped with other buyers in the region such as South Korea.

On Wednesday, bids stood at $123.50 for May deliveries, $124.50 for June, and $127.00 for August, indicating an uptick in buying interest. The globalCOAL index also showed signs that prices may be hitting bottom, with the index for the week to date on Tuesday moving up about 90 cents from the week to date index on Monday.
"I don't think excess cargoes will continue stressing the market," said one Singapore-based source. "They are finally finding destinations (for the cargoes) and there is no more prompt price impact." Exports out of Australia's biggest thermal coal export terminal dropped in the week ending March 21 as rail maintenance and some weather impacts on mine production reduced shipments.

Russian thermal coal shipments to Japan are still continuing with little interruption, exporter sources said. Buying interest from China, the world's biggest producer and consumer of coal, remained low, despite Chinese buyers picking up a few shipments destined for quake-hit Japan.

China's thermal coal prices slid to 775 yuan ($118) in the latest week on the back of abundant supplies, as output rose in many key coal provinces and domestic prices remained below international levels despite the drop in near-term Newcastle coal prices.

WEEK AHEAD
The coal market will be focused on Japan's recovery from the earthquake in early March, in particular the recovery of several coal-fired power plants to determine Japan's coal demand in the short- to medium-term.

The market will also have its eye on the nuclear crisis in Japan to search for an indication of whether nuclear energy will suffer.

After a brief hiatus following the quake, Xstrata is expected to meet with Japanese utilities, represented by Chugoku Electric Power , this week to negotiate their annual thermal coal contract, which will start on April 1. The contract price, which serves as a benchmark for much of Asia, is likely to settle around $130 per tonne, said traders and analysts.