Switzerland-based mining and commodity trading giant Glencore PLC has agreed to supply coal to a Japanese customer at one of the highest prices ever paid by the nation, threatening to further accelerate inflation.
Nippon Steel Corp agreed on a supply deal through March next year with Glencore for power plant coal at US$375 per tonne, said people with knowledge of the deal who asked not to be identified because the information is private.
The agreement is three times more expensive than similar deals struck last year and is likely one of the costliest coal contracts ever signed by a Japanese company, one of the people said.
Photo: Reuters
Spokespeople for Glencore and Nippon Steel declined to comment.
Global competition for coal and natural gas is escalating as power generators move to secure additional fuel shipments amid an energy crunch.
Utilities are curbing imports from Russia due to Moscow’s war in Ukraine, tightening the amount of available supply and sending prices surging.
Japan has been struggling with strained electricity supplies and high demand during a heat wave over the past few weeks.
Nippon Steel, which uses fuel to power its industrial sites and supplies electricity to Japan’s grid, earlier this month purchased the country’s most expensive ever natural gas shipment.
Glencore is the world’s top coal shipper, and profits from the power plant fuel are at an all-time high.
The resource giant is on course for a record year as it cashes in on soaring prices and volatility.
The Glencore deal might be used as the benchmark price for other annual supplies by thermal coal users in Asia, the people said.
That would boost the cost to generate electricity, and threaten to increase power bills for businesses and households.
Australian Newcastle coal futures closed at US$410.45 per tonne on Tuesday on ICE Futures Europe, after setting a record earlier this year.
European coal futures for next year rallied to an all-time high on Tuesday as Russia threatens to curb gas supplies to the continent.
Separately, Rio Tinto Group reported a sharp decline in profits in the first half of the year and cut its dividend in half, in the latest sign that a bonanza era of record returns across the mining industry is nearing an end.
A year earlier, the world’s biggest producers were enjoying supersized returns, after key commodities such as iron ore and copper surged.
Now, profit margins are being squeezed as recessionary worries drive prices lower while costs across the sector are ballooning.
Rio reported underlying earnings of US$8.6 billion in the first half, missing the average analyst estimate and down from a record US$12.2 billion last year.
The company is planning to pay a US$4.3 billion dividend compared with US$9.1 billion it returned a year earlier.
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