The value of those exports has crept downwards in recent times, as the Asian economic crisis and overproduction combined to strangle the market. For the Japanese fiscal year starting April 1 1999, Australian exporters have had to swallow contract price cuts ranging from 13-8%.
Most Australian producers have survived by trimming costs, but the lower contract prices have forced a spate of rationalisation moves.
Unfortunately, the market is unlikely to improve much in the year 2000. The annual coal price talks between Australian producers and Japanese consumers kicked off in late 1999, with some analysts forecasting another price fall, albeit slight.“The big problem for Australian producers is somebody usually breaks ranks and dumps the price in exchange for more tonnes,” said Duncan McBain, an analyst at Paterson Ord Minnett. McBain is tipping a $1-2r tonne drop in coking coal benchmark prices, and a similar fall in thermal prices.One problem is that benchmark prices are becoming increasingly irrelevant, as cash-trapped Japanese companies opt to buy coal on the spot market. For instance, recent spot thermal cargoes have sold for around $US20/tonne versus the benchmark contract price of just under $US30/t. “People are saying ‘why should I pay $US10/t more than the spot price,” McBain said.