The gap between Newcastle prices and Richards Bay prices has fallen to $7 as the globalCOAL RB index climbed 4.61% over the week to $US76.08/t.

In the data ending on January 23, Newcastle prices were $US15.46/t higher than Richards Bay prices, yet the biggest surprise has come from the DES ARA price which is untypically trading far below Richards Bay as of January 30 at $US69.71/t.

Last week Paterson Securities coal analyst Andrew Harrington told International Longwall News ARA prices are considered to be South African spot prices plus freight, making it highly unusual for that index to be trading lower than Richards Bay prices.

“My best estimate would be that you are seeing Richards Bay prices reflecting Asian prices rather than European prices,” he said at the time when the ARA price was only $2.17 lower than the Richards Bay index.

In a sign of dwindling European demand for thermal coal, Harrington indicated Richards Bay coal could instead be making its way east to India and other parts of Asia.

The widening gap between ARA prices and Richards Bay prices could also indicate a more protracted slowdown in European industrial activity during the ongoing global financial crisis than previously anticipated.

Meanwhile, the fall of Newcastle prices from the recent highs was foreseen by analysts from Macquarie Research last week.

In a commodities report, Macquarie blamed traders reacting to scarce physical spot coal along with rain and equipment issues in December and general underperformance in the supply chain.

Macquarie had expected a correction in Newcastle spot prices as mines in New South Wales’ Hunter Valley switched to thermal coal production and general production recovers from rain interruptions.