According to The Australian Financial Review, the spot market was the place to be for coal miners in 2016, but with prices for the bulk commodity sliding rapidly, 2017 looks set to favour those selling on traditional quarterly contracts.
Those selling Australian coal at prices agreed in quarterly contracts, like Glencore and Anglo American, were left behind when coking coal prices skyrocketed last year, with the spot price more than $US120 higher than the contract price at one stage in September.
But the roles have quickly reversed on a 35 per cent slide in coking coal spot prices over the past 40 days; those selling at contract prices will receive $US285 for each tonne until March 31, and are already enjoying a 30 per cent premium over coal sold on the spot market, which is fetching about $US201 per tonne.
The rapid slide in the spot price has followed China's decision to overturn many of the supply interruptions that caused the coal price to rally in 2016 .
If, as expected, contract prices are stronger than spot prices during 2017, it will be the fourth year in five that contract prices have averaged higher than the spot price.
Credit Suisse has forecast coking coal will average $US194 a tonne in fiscal 2017, then fall to $US145 in 2018 and $US125 in 2019.
Shaw and Partners analyst Peter O'Connor believes spot prices for coking coal will be around $US120 or $US100 a tonne by the December quarter of 2017.
The steep falls in the spot price will eventually drag contract prices lower, with Mr O'Connor suggesting the contract price for the three months to June 30, 2017, will be significantly lower than the present quarterly price of $US285 a tonne.
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